Approximate date of commencement of proposed sale to the public: As soon as practicable after this
Registration
Statement becomes effective.

If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following
box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý (Do not check if a smaller reporting company)

Smaller reporting company o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the offer or sale is not permitted.

30,000,000 Shares

CLASS A COMMON STOCK

Groupon, Inc. is offering 30,000,000 shares of its Class A common stock. This is our initial public offering and no public market currently exists
for our shares. We anticipate that the initial public offering price of our Class A common stock will be between $16.00 and $18.00 per share.

Following this offering, we will have two classes of outstanding common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and
Class B common stock will be identical, except with respect to voting and conversion. Each share of Class A common stock will be entitled to one vote per share. Each share of
Class B common stock will be entitled to 150 votes per share and will be convertible at any time into one share of Class A common stock. Outstanding shares of Class B common stock
will represent approximately 36.3% of the voting power of our outstanding capital stock following this offering.

We have applied to list our Class A common stock on the NASDAQ Global Select Market under the symbol "GRPN."

Investing in our Class A common stock involves risks. See "Risk Factors" beginning on page 11.

PRICE $ A SHARE

Price to
Public

Underwriting
Discounts and
Commissions

Proceeds to
Groupon

Per Share

$

$

$

Total

$

$

$

Groupon, Inc. has granted the underwriters the right to purchase up to an additional 4,500,000 shares of Class A common stock to
cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these
securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock to purchasers
on , 2011.

You
should rely only on the information contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission. Neither we nor the underwriters
have authorized anyone to provide you with additional or different information. We are offering to sell, and seeking offers to buy, our Class A common stock only in jurisdictions where offers
and sales are permitted. The information in this prospectus or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or any sale of shares of our
Class A common stock.

Until , 2011 (the 25th day after the date of this prospectus), all dealers that buy, sell or
trade shares of our Class A common stock,
whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution
of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about and to observe any restrictions relating to
the offering of the shares of Class A common stock and the distribution of this prospectus outside of the United States.

This summary highlights information contained elsewhere in this prospectus and does not contain all of the
information you should consider in making your investment decision. Before investing in our Class A common stock, you should carefully read this entire prospectus, including our consolidated
financial statements and the related notes and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
in each case included elsewhere in this prospectus. Except where the context requires otherwise, in this prospectus the terms "Company," "Groupon," "we," "us" and "our" refer to Groupon, Inc., a
Delaware corporation, and where appropriate, its direct and indirect subsidiaries.

GROUPON, INC.

Groupon is a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a
discount. Traditionally, local merchants have tried to reach consumers and generate sales through a variety of methods, including the yellow pages, direct mail, newspaper, radio, television and online
advertisements, promotions and the occasional guy dancing on a street corner in a gorilla suit. By bringing the brick and mortar world of local commerce onto the internet, Groupon is creating a new
way for local merchants to attract customers and sell goods and services. We provide consumers with savings and help them discover what to do, eat, see and buy in the places where they live and work.

We
started Groupon in October 2008 and believe the growth of our business demonstrates the power of our solution and the size of our market opportunity:



We increased our revenue from $1.2 million in the second quarter of 2009 to $430.2 million in the third
quarter of 2011. We generated these revenues from gross billings of $3.3 million for the second quarter of 2009 as compared to gross billings of $1,157.2 million for the third quarter of
2011. We had net income of $21,000 for the second quarter of 2009 as compared to a net loss of $10.6 million for the third quarter of 2011.



We expanded from five North American markets as of June 30, 2009 to 175 North American markets and
45 countries as of September 30, 2011. Revenue from our international and North American operations was $268.7 million and $161.5 million, respectively, in the third
quarter of 2011.



We increased our subscriber base from 152,203 as of June 30, 2009 to 142.9 million as of
September 30, 2011. A total of 43,014 customers purchased Groupons through the end of the second quarter of 2009 as compared to 29.5 million through the end of the third quarter of 2011,
including 16.0 million customers who have purchased more than one Groupon since January 1, 2009.



We increased the number of merchants featured in our marketplace from 212 in the second quarter of 2009 to 78,649 in the
third quarter of 2011.



We sold 116,231 Groupons in the second quarter of 2009 compared to 33.0 million Groupons in the third quarter of
2011.



We grew from 37 employees as of June 30, 2009 to 10,418 employees as of September 30, 2011.

Each
day we email our subscribers discounted offers for goods and services that are targeted by location and personal preferences. Consumers also access our deals directly through our
websites and mobile applications. A typical deal might offer a $20 Groupon that can be redeemed for $40 in value at a restaurant, spa, yoga studio, car wash or other local merchant. Customers purchase
Groupons from us and redeem them with our merchants. Our revenue is the purchase price paid by the customer for the Groupon less an agreed upon percentage of the purchase price paid to the featured
merchant. Our gross billings represent the gross amounts collected from customers for Groupons sold, and we consider this metric to be

an
indicator of our growth and business performance as it measures the dollar volume of transactions through our marketplace. Gross billings are not equivalent to revenues or any other metric
presented in our consolidated financial statements.

Our Advantage

Customer experience and relevance of deals. We are committed to providing a great customer experience and maintaining the trust of our
customers. We
use our technology and scale to target relevant deals based on individual subscriber preferences. As we increase the volume of transactions through our marketplace, we increase the amount of data that
we have about deal performance and customer interests. This data allows us to continue to improve our ability to help merchants design the most effective deals and deliver deals to customers that
better match their interests.

Merchant scale and quality. In the nine months ended September 30, 2011, we featured deals from over 190,000 merchants
worldwide across
over 190 categories of goods and services. Our salesforce of over 4,800 sales representatives enables us to work with local merchants in 175 North American markets and
45 countries. We draw on the experience we have gained in working with merchants to evaluate prospective merchants based on quality, location and relevance to our subscribers. We maintain a
large base of prospective merchants interested in our marketplace, which enables us to be more selective and offer our subscribers higher quality deals. Increasing our merchant base also increases the
number and variety of deals that we offer to consumers, which we believe drives higher subscriber and user traffic, and in turn promotes greater merchant interest in our marketplace.

Brand. We believe we have built a trusted and recognizable brand by delivering a compelling value proposition to consumers and
merchants. A benefit
of our well recognized brand is that a substantial portion of our subscribers in our established markets is acquired through word-of-mouth. We believe our brand is trusted due
to our dedication to our customers and our significant investment in customer satisfaction.

Our Strategy

Our objective is to become an essential part of everyday local commerce for consumers and merchants. Key elements of our strategy
include the following:

Grow our subscriber base. We have made significant investments to acquire subscribers through online marketing initiatives. Our
subscriber base has
also increased by word-of-mouth. Our investments in subscriber growth are driven by the cost to acquire a subscriber relative to the profits we expect to generate from that
subscriber over time. Our goal is to retain existing and acquire new subscribers by providing more targeted and real-time deals, delivering high quality customer service and expanding the
number and categories of deals we offer.

Grow the number of merchants we feature. To drive merchant growth, we have expanded the number of ways in which consumers can discover
deals through
our marketplace. For example, to better target subscribers, in February 2011, we launched Deal Channels, which aggregates daily deals from the same category. We adjust the number and variety of
products we offer merchants based on merchant demand in each market. We have also made significant investments in our salesforce, which builds merchant
relationships and local expertise. Our merchant retention efforts are focused on providing merchants with a positive experience by offering targeted placement of their deals to our subscriber base,
high quality customer service and tools to manage deals more effectively.

Increase the number and variety of our products through innovation. We have launched a variety of new products in the past
12 months and we
plan to continue to launch new products to increase the number of subscribers and merchants that transact business through our marketplace. As our local

e-commerce
marketplace grows, we believe consumers will use Groupon not only as a discovery tool for local merchants, but also as an ongoing connection point to their favorite merchants.

Expand with acquisitions and business development partnerships. Since May 2010, we have made 19 acquisitions and we have entered
into several
agreements with local partners to expand our international presence. The increase in our revenue, key operating metrics and employee headcount from 2009 to 2010 is partially attributable to these
acquisitions and the subsequent growth of our international operations as a result of such acquisitions. We have also entered into affiliate programs with companies such as eBay, Microsoft, Yahoo and
Zynga, pursuant to which these partners display, promote and distribute our deals to their users in exchange for a share of the revenue generated from our deals. We intend to continue to expand our
business with strategic acquisitions and business development partnerships.

Our Metrics

We have organized our operations into two principal segments: North America, which represents the United States and Canada; and
International, which represents the rest of our global operations.

The
key metrics we use to measure our business include revenue, free cash flow and consolidated segment operating (loss) income, or CSOI. Free cash flow and CSOI are non-GAAP
financial measures. See "Summary Consolidated Financial and Other DataNon-GAAP Financial Measures" for a reconciliation of these measures to the most applicable
financial measures under U.S. GAAP.

We
believe revenue is an important indicator for our business because it is a reflection of the value of our service to our merchants. In 2010 and the nine months ended
September 30, 2011, we generated revenue of $312.9 million and $1,118.3 million, respectively.

We
believe free cash flow is an important indicator for our business because it measures the amount of cash we generate after spending on marketing, wages and benefits, capital
expenditures and other items. Free cash flow also reflects changes in working capital. In 2010 and the nine months ended September 30, 2011, we generated free cash flow of $72.2 million
and $99.7 million, respectively.

We
believe CSOI is an important measure for management to evaluate the performance of our business as it represents the operating results of our segments as reported under
U.S. GAAP and does not include certain non-cash expenses. In 2010 and the nine months ended September 30, 2011, our CSOI was $(181.0) million and $(162.3) million,
respectively.

Our Risks

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are
discussed more fully under the caption "Risk Factors," and include but are not limited to the following:



we may not maintain the revenue growth that we have experienced since inception;



we have experienced rapid growth over a short period in a new market we have created and we do not know whether this
market will continue to develop or whether it can be maintained;



we base our decisions regarding investments in subscriber acquisition on assumptions regarding our ability to generate
future profits that may prove to be inaccurate;



we have incurred net losses since inception and we expect our operating expenses to increase significantly in the
foreseeable future;



if we fail to retain our existing subscribers or acquire new subscribers, our revenue and business will be harmed;

if we fail to retain existing merchants or add new merchants, our revenue and business will be harmed;



our business is highly competitive and competition presents an ongoing threat to the success of our business;



if we are unable to recover subscriber acquisition costs with revenue generated from those subscribers, our business and
operating results will be harmed;



if we are unable to maintain favorable terms with our merchants, our revenue may be adversely affected; and



our operating cash flow and results of operations could be adversely impacted if we change our merchant payment terms or
our gross billings do not continue to grow.

Corporate Information

We are a Delaware corporation. Our principal executive offices are located at 600 West Chicago Avenue, Suite 620, Chicago,
Illinois 60654, and our telephone number at this address is (312) 676-5773. Our website is www.groupon.com. Information contained on
our website is not a part of this prospectus.

GROUPON,
the GROUPON logo, GROUPON NOW and other GROUPONformative marks are trademarks of Groupon, Inc. in the United States or other countries. This prospectus also
includes other trademarks of Groupon and trademarks of other persons.

Letter from Andrew D. Mason

A letter from Andrew D. Mason, one of our co-founders and our Chief Executive Officer, appears on page 33 of this
prospectus.

Total shares of Class A common stock and Class B common stock to be outstanding after this offering

632,803,328

shares

Use of proceeds

We expect our net proceeds from this offering will be approximately $478.8 million, assuming an initial public
offering price of $17.00, which is the midpoint of the range reflected on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We plan to use the net
proceeds from this offering for working capital and other general corporate purposes, which may include the acquisition of other businesses, products or technologies; however, we do not have any commitments for any acquisitions at this time. See "Use
of Proceeds."

Risk factors

You should read the "Risk Factors" section of this prospectus for a discussion of factors to consider carefully
before deciding to invest in shares of our Class A common stock.

Proposed NASDAQ Global Select Market symbol

"GRPN"

The
number of shares of our Class A common stock that will be outstanding after this offering is based on 600,403,352 shares outstanding at September 30, 2011, and
excludes:



2,399,976 shares of Class A common stock issuable upon the conversion of our Class B common stock
that will be outstanding after this offering;



18,407,510 shares of Class A common stock issuable upon the exercise of stock options outstanding as of
September 30, 2011 at a weighted average exercise price of $1.11 per share;



10,575,100 shares of Class A common stock issuable upon the vesting of restricted stock units;



2,694,358 shares of Class A common stock available for additional grants under our 2010 Plan; and



49,974,998 shares of Class A common stock available for grants under our 2011 Plan, which we adopted
effective August 17, 2011.

On October 31, 2011, we effectuated a two-for-one forward stock split of our voting common stock and non-voting common stock. Immediately following the stock split, we
recapitalized all of our outstanding shares of capital stock (other than outstanding shares of our Series B preferred stock) into newly issued shares of our Class A common stock. In
addition, we recapitalized all of our outstanding shares of our Series B preferred stock into newly issued shares of our Class B common stock. The purpose

of the recapitalization was to exchange all of our outstanding shares of capital stock (other than outstanding shares of our Series B preferred stock) for shares of the Class A common
stock that will be sold in this offering. See "Description of Capital StockStock Split and Recapitalization."

Our
Class A common stock and Class B common stock will automatically convert into a single class of common stock five years after the completion of this offering. See
"Description of Capital StockClass A and Class B Common StockConversion."

Except as otherwise indicated, all share and per share amounts in this prospectus:



give effect to a two-for-one forward stock split of our voting common stock and
non-voting common stock that occurred on October 31, 2011;



give effect to the recapitalization of all outstanding shares of our capital stock (other than outstanding shares of our
Series B preferred stock) into 600,403,352 shares of Class A common stock and all outstanding shares of our Series B preferred stock into 2,399,976 shares of
Class B common stock that occurred on October 31, 2011 immediately following the two-for-one forward stock split;



give effect to the amendment and restatement of our certificate of incorporation that occurred on October 31, 2011;
and

We present below our summary consolidated financial and other data for the periods indicated. Financial information for periods prior
to 2008 has not been provided because we began operations in 2008. The summary consolidated statements of operations data for the years ended December 31, 2008, 2009 and 2010 and the balance
sheet data as of December 31, 2009 and 2010 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The balance sheet data for the year ended
December 31, 2008 was derived from financial statements that are not included in this prospectus. The summary consolidated statements of operations data for the periods ended
September 30, 2010 and 2011 and the balance sheet data as of September 30, 2011 have been derived from our unaudited consolidated financials statements included elsewhere in this
prospectus. The unaudited information was prepared on a basis consistent with that used to
prepare our audited financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of the unaudited period. The
historical results presented below are not necessarily indicative of financial results to be achieved in future periods. You should read this information together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our audited and unaudited consolidated financial statements and accompanying notes, each included elsewhere in this prospectus.

The
Consolidated Financial Statements have been restated for the presentation of revenue on a net basis for the years ended December 31, 2008, 2009
and 2010. See Note 2 to our Consolidated Financial Statements.

(2)

Unaudited
pro forma net loss per share gives effect to (i) a two-for-one forward stock split of our voting common stock and non-voting common stock
that occurred on October 31, 2011; (ii) the recapitalization of all outstanding shares of our capital stock (other than outstanding shares of our Series B preferred stock) into
shares of Class A common stock and all outstanding shares of our Series B preferred stock into shares of Class B common stock that occurred on October 31, 2011 immediately
following the two-for-one forward stock split; and (iii) the amendment and restatement of our certificate of incorporation on October 31, 2011.

(3)

Consolidated
segment operating (loss) income, or CSOI, is a non-GAAP financial measure. See "Summary Consolidated Financial and Other
DataNon-GAAP Financial Measures" for a reconciliation of this measure to the most applicable financial measure under U.S. GAAP. We do not allocate stock-based compensation and
acquisition-related expense to the segments. See Note 14 "Segment Information" of Notes to Consolidated Financial Statements and Note 14
"Segment Information" of Notes to Condensed Consolidated Financial Statements (Unaudited) for additional information.

Year Ended December 31,

Nine Months Ended
September 30,

2008

2009

2010

2010

2011

Operating Metrics:

Gross billings (in thousands)(1)

$

94

$

34,082

$

745,348

$

330,079

$

2,754,633

Subscribers(2)

*

1,807,278

50,583,805

21,369,608

142,865,836

Cumulative customers(3)

*

375,099

9,031,807

4,623,267

29,504,314

Featured merchants(4)

*

2,695

66,289

31,190

190,795

Groupons sold(5)

*

1,248,792

30,296,070

14,060,589

93,629,524

Average revenue per subscriber(6)

*

$

8.0

$

11.9

$

12.1

$

11.6

Average cumulative Groupons sold per customer(7)

*

3.3

3.5

3.3

4.2

Average revenue per Groupon sold(8)

*

$

11.6

$

10.3

$

10.0

$

11.9

Cumulative repeat customers(9)

*

162,323

4,483,976

2,186,791

16,045,533

*

Not
available

(1)

Reflects
the gross amounts collected from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds, in the applicable
period.

(2)

Reflects
the total number of subscribers who had a Groupon account on the last day of the applicable period, less individuals who have unsubscribed. May
include individual subscribers with multiple registrations because the information we collect from subscribers does not permit us to identify when a subscriber may have created multiple accounts, nor
do we prevent subscribers from creating multiple accounts. Also may include individuals who do not receive our email offers because our emails have been blocked or are otherwise undeliverable.

(3)

Reflects
the total number of unique customers who have purchased Groupons from January 1, 2009 through the end of the applicable period. May include
individual customers with multiple registrations.

(4)

For
periods after March 31, 2011, reflects the total number of unique merchants featured in the applicable period. For periods prior to
March 31, 2011, reflects the total number of merchant deals featured in the applicable period because data as to unique merchants is not available for those periods.

(5)

Reflects
the total number of Groupons sold in the applicable period.

(6)

Reflects
the average revenue generated per average number of subscribers in the applicable period.

(7)

Reflects
the average number of Groupons sold per cumulative customer from January 1, 2009 through the end of the applicable period.

(8)

Reflects
the average revenue generated per Groupon sold in the applicable period.

(9)

Reflects
the total number of unique customers who have purchased more than one Groupon from January 1, 2009 through the end of the applicable period.

The
pro forma column gives effect to (i) a two-for-one forward stock split of our voting common stock and non-voting common stock that occurred on
October 31, 2011; (ii) the recapitalization of all outstanding shares of our capital stock (other than outstanding shares of our Series B preferred stock) into
600,403,352 shares of Class A common stock and all outstanding shares of our Series B preferred stock into 2,399,976 shares of Class B common stock that occurred on
October 31, 2011 immediately following the two-for-one forward stock split; and (iii) the amendment and restatement of our certificate of incorporation on October 31, 2011.

(2)

The
pro forma as adjusted column gives further effect to the sale by us of Class A common stock in this offering at an assumed initial public
offering price of $17.00 per share, which is the midpoint of the range reflected on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us.

(3)

Each
$1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share would increase (decrease) the amount of pro forma as
adjusted cash and cash equivalents, working capital (deficit), total assets and total Groupon, Inc. stockholders' equity by approximately $28.5 million, assuming the number of shares offered by
us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Similarly, each increase (decrease) of one million shares in the number of shares of Class A common stock offered by us would increase (decrease) cash and cash equivalents, working capital
(deficit), total assets and total Groupon, Inc. stockholders' equity by approximately $16.2 million, assuming the assumed initial public offering price remains the same and after deducting
estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Non-GAAP Financial Measures

We use free cash flow and consolidated segment operating (loss) income, or CSOI, as key non-GAAP financial measures. Free
cash flow and CSOI are used in addition to and in conjunction with results presented in accordance with U.S. GAAP and should not be relied upon to the exclusion of U.S. GAAP financial measures.

Free
cash flow, which is reconciled to "Net cash (used in) provided by operating activities," is cash flow from operations reduced by "Purchases of property and equipment." We use free
cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it typically will present a more conservative measure
of cash flows as purchases of fixed assets, software developed for internal use and website development costs are a necessary component of ongoing operations.

Free
cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not include
the cash payments for business acquisitions. In addition, free cash flow reflects the impact of the timing difference between when we are paid by customers and when we pay merchants. Therefore, we
believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.

CSOI
is the consolidated operating (loss) income of our two segments, North America and International, adjusted for acquisition-related costs and stock-based compensation expense.
Acquisition-related costs are non-recurring, non-cash items related to certain of our acquisitions. Stock-based compensation expense is a non-cash item. We do not
allocate stock-based compensation and acquisition-related expenses to the segments. See Note 14 "Segment Information" of Notes to Consolidated Financial Statements and Note 14 "Segment
Information" of Notes to Condensed Consolidated Financial Statements (Unaudited) for additional information.

We
consider CSOI to be an important measure for management to evaluate the performance of our business as it excludes certain non-cash expenses. We believe it is important to
view
CSOI as a complement to our entire consolidated statements of operations. When evaluating our performance, you should consider CSOI as a complement to other financial performance measures, including
various cash flow metrics, net loss and our other U.S. GAAP results.

Free Cash Flow

The following is a reconciliation of free cash flow to the most comparable U.S. GAAP measure, "Net cash (used in) provided by operating
activities," for the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2010 and 2011:

Year Ended December 31,

Nine Months Ended
September 30,

2008

2009

2010

2010

2011

(in thousands)

Net cash (used in) provided by operating activities

$

(1,526

)

$

7,510

$

86,885

$

34,966

$

129,511

Purchases of property and equipment

(19

)

(290

)

(14,681

)

(6,092

)

(29,825

)

Free cash flow

$

(1,545

)

$

7,220

$

72,204

$

28,874

$

99,686

CSOI

The following is a reconciliation of CSOI to the most comparable U.S. GAAP measure, "Loss from operations," for the years ended
December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2010 and 2011:

Year Ended December 31,

Nine Months Ended
September 30,

2008

2009

2010

2010

2011

(in thousands)

Loss from operations

$

(1,632

)

$

(1,077

)

$

(420,344

)

$

(84,215

)

$

(218,414

)

Adjustments:

Stock-based compensation(1)

24

115

36,168

8,739

60,922

Acquisition-related(2)





203,183

37,844

(4,793

)

Total adjustments

24

115

239,351

46,583

56,129

CSOI

$

(1,608

)

$

(962

)

$

(180,993

)

$

(37,632

)

$

(162,285

)

(1)

Represents
non-cash stock-based compensation expense recorded within cost of revenue, marketing and selling, general and administrative expense.

(2)

Primarily
represents non-cash charges for remeasurement of the fair value of contingent consideration related to acquisitions made in 2010. The
amount of the charge in 2010 was due to the significant increase in the value of common stock from the original acquisition date until the date the contingency was ultimately settled.

An investment in our Class A common stock involves a high degree of risk. You should carefully consider
the risks described below and all of the other information contained in this prospectus before deciding whether to purchase our Class A common stock. Our business, prospects, financial
condition or operating results could be materially adversely affected by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading
price of our Class A common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing the risks described below, you should also refer to the
other information contained in this prospectus, including our consolidated financial statements and the related notes, before deciding to purchase any shares of our Class A common stock.

Risks Related to Our Business

We may not maintain the revenue growth that we have experienced since inception.

Although our revenue has increased substantially since inception, we may not be able to maintain our historical rate of revenue growth.
We believe that our continued revenue growth will depend, among other factors, on our ability to:



acquire new subscribers who purchase Groupons;



retain our existing subscribers and have them continue to purchase Groupons;



attract new merchants who wish to offer deals through the sale of Groupons;



retain our existing merchants and have them offer additional deals through our marketplace;



expand the number, variety and relevance of products and deals we offer each day;



increase the awareness of our brand across geographies;



provide our subscribers and merchants with a superior experience;



respond to changes in consumer access to and use of the internet and mobile devices; and



react to challenges from existing and new competitors.

However,
we cannot assure you that we will successfully implement any of these actions.

We have experienced rapid growth over a short period in a new market that we have created and we do not know whether this market will continue to develop or whether it can
be maintained. If we are unable to successfully respond to changes in the market, our business could be harmed.

Our business has grown rapidly as merchants and consumers have increasingly used our marketplace. However, this is a new market which
we only created in late 2008 and which has operated at a substantial scale for only a limited period of time. Given the limited history, it is difficult to predict whether this market will continue to
grow or whether it can be maintained. For example, as a result of our limited operating history in a new industry and because the majority of our subscribers registered for our service or made their
initial purchase of a Groupon in the past 12 months, it is difficult to discern meaningful or established trends with respect to the purchase activity of our subscribers or customers. We expect that
the market will evolve in ways which may be difficult to predict. For example, we anticipate that over time we will reach a point in most markets where we have achieved a market penetration such that
investments in new subscriber acquisition are less productive and the continued growth of our revenue will require more focus on increasing the rate at which our existing subscribers purchase
Groupons. It is also possible that merchants or customers could broadly determine that they no longer believe in the value of our current services or marketplace. In the event of these or any other
changes to the market, our continued success will depend on our ability to successfully adjust our strategy to meet the changing market dynamics. If we are unable to do so, our business could be
harmed and our results of operations subject to a material negative impact.

We base our decisions regarding investments in subscriber acquisition primarily on our analysis of the profits generated from subscribers that we acquired in prior periods.
If the estimates and assumptions we use are inaccurate, we may not be able to recover our subscriber acquisition costs and our growth rate and financial results will be adversely affected.

Our decisions regarding investments in subscriber acquisition substantially depend upon our analysis of the profits generated from
subscribers we acquired in earlier periods. We refer to this as our subscriber economics. Our analysis regarding subscriber economics includes several assumptions,
including:



Because the costs of offering or distributing deals to existing subscribers are not significant, our analysis focuses on
the online marketing costs incurred during the quarter in which the subscribers are originally acquired and makes various assumptions with respect to the level of additional marketing or other
expenses necessary to maintain subscriber loyalty and generate purchase activity in subsequent periods. If our assumptions regarding such expenses in subsequent periods are incorrect, our subscriber
economics could be less favorable than we believe.



The analysis which we present below in "BusinessSubscriber Economics" includes a discussion of our Q2 2010
cohort and case studies from certain of our largest markets. These results inherently reflect a distinct group of merchants, subscribers and geographies and may not be representative of our current or
future composite group of merchants, subscribers and geographies. For example, our Q2 2010 cohort and market case studies may reflect unique market dynamics or the novelty of our service during the
periods covered.

If
our assumptions regarding our subscriber economics, including those relating to the effectiveness of our marketing spend, prove incorrect, our ability to generate profits from our
investments in new subscriber acquisitions may be less than we have assumed. In such case, we may need to increase expenses or otherwise alter our strategy and our results of operations could be
negatively impacted.

We have incurred net losses since inception and we expect our operating expenses to increase significantly in the foreseeable future.

We incurred net losses of $389.6 million and $214.5 million in 2010 and the nine months ended September 30, 2011,
respectively, and had an accumulated deficit of $633.9 million as of September 30, 2011. We anticipate that our operating expenses will increase substantially in the foreseeable future
as we continue to invest to increase our subscriber base, increase the number and variety of deals we offer each day, expand our marketing channels, expand our operations, hire additional employees
and develop our technology platform. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses.
Many of our efforts to generate revenue from our business are new and unproven, and any failure to increase our revenue could prevent us from attaining or increasing profitability. We cannot be
certain that we will be able to attain or increase profitability on a quarterly or annual basis. If we are unable to effectively manage these risks and difficulties as we encounter them, our business,
financial condition and results of operations may suffer.

If we fail to retain our existing subscribers or acquire new subscribers, our revenue and business will be harmed.

We spent $466.5 million on online marketing initiatives relating to subscriber acquisition for the nine months ended
September 30, 2011 and expect to continue to spend significant amounts to acquire additional subscribers. We must continue to retain and acquire subscribers that purchase Groupons in order to
increase revenue and achieve profitability. We cannot assure you that the revenue from subscribers we acquire will ultimately exceed the cost of acquiring new subscribers. If consumers do not perceive
our Groupon offers to be of high value and quality or if we fail to introduce new and more relevant deals, we may not be able to acquire or retain subscribers. Recently, we have reduced our subscriber
acquisition costs as a percentage of revenue. We cannot assure you that this will not adversely impact our ability to acquire new subscribers. If we are unable to acquire new subscribers who purchase

Groupons
in numbers sufficient to grow our business, or if subscribers cease to purchase Groupons, the revenue we generate may decrease and our operating results will be adversely affected.

We
believe that many of our new subscribers originate from word-of-mouth and other non-paid referrals from existing subscribers, and therefore we must
ensure that our existing subscribers remain loyal to our service in order to continue receiving those referrals. If our efforts to satisfy our existing subscribers are not successful, we may not be
able to acquire new subscribers in sufficient numbers to continue to grow our business or we may be required to incur significantly higher marketing expenses in order to acquire new subscribers.
Further, we believe that our success is influenced by the level of communication and sharing among subscribers. If the level of usage by our subscriber base declines or does not grow as expected, we
may suffer a decline in subscriber growth or revenue. A significant decrease in the level of usage or subscriber growth would have an adverse effect on our business, financial condition and results of
operations.

If we fail to retain existing merchants or add new merchants, our revenue and business will be harmed.

We depend on our ability to attract and retain merchants that are prepared to offer products or services on compelling terms through
our marketplace. We do not have long-term arrangements to guarantee the availability of deals that offer attractive quality, value and variety to consumers or favorable payment terms to
us. We must continue to attract and retain merchants in order to increase revenue and achieve profitability. If new merchants do not find our marketing and promotional services effective, or if
existing merchants do not believe that utilizing our products provides them with a long-term increase in customers, revenue or profit, they may stop making offers through our marketplace.
In addition, we may experience attrition
in our merchants in the ordinary course of business resulting from several factors, including losses to competitors and merchant closures or bankruptcies. If we are unable to attract new merchants in
numbers sufficient to grow our business, or if too many merchants are unwilling to offer products or services with compelling terms through our marketplace or offer favorable payment terms to us, we
may sell fewer Groupons and our operating results will be adversely affected.

If
our efforts to market, advertise and promote products and services from our existing merchants are not successful, or if our existing merchants do not believe that utilizing our
services provides them with a long-term increase in customers, revenue or profit, we may not be able to retain or attract merchants in sufficient numbers to grow our business or we may be
required to incur significantly higher marketing expenses or accept lower margins in order to attract new merchants. A significant increase in merchant attrition or decrease in merchant growth would
have an adverse effect on our business, financial condition and results of operation.

Our business is highly competitive. Competition presents an ongoing threat to the success of our business.

We expect competition in e-commerce generally, and group buying in particular, to continue to increase because there are no
significant barriers to entry. A substantial number of group buying sites that attempt to replicate our business model have emerged around the world. In addition to such competitors, we expect to
increasingly compete against other large internet and technology-based businesses, such as Google and Microsoft, each of which has launched initiatives which are directly competitive to our business.
We also expect to compete against other internet sites that are focused on specific communities or interests and offer coupons or discount arrangements related to such communities or interests. We
also compete with traditional offline coupon and discount services, as well as newspapers, magazines and other traditional media companies who provide coupons and discounts on products and services.

We
believe that our ability to compete depends upon many factors both within and beyond our control, including the following:



the size and composition of our subscriber base and the number of merchants we feature;

the timing and market acceptance of deals we offer, including the developments and enhancements to those deals offered by
us or our competitors;



subscriber and merchant service and support efforts;



selling and marketing efforts;



ease of use, performance, price and reliability of services offered either by us or our competitors;



our ability to cost-effectively manage our operations; and



our reputation and brand strength relative to our competitors.

Many
of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger subscriber bases than we do.
These factors may allow our competitors to benefit from their existing customer or subscriber base with lower customer acquisition costs or to respond more quickly than we can to new or emerging
technologies and changes in consumer habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more
aggressive pricing policies, which may allow them to build larger subscriber bases or generate revenue from their subscriber bases more effectively than we do. Our competitors may offer deals that are
similar to the deals we offer or that achieve greater market acceptance than the deals we offer. This could attract subscribers away from our websites and applications, reduce our market share and
adversely impact our revenue. In addition, we are dependent on some of our existing or potential competitors, including Google and Microsoft, for banner advertisements and other marketing initiatives
to acquire new subscribers. Our ability to utilize their platforms to acquire new subscribers may be adversely affected if they choose to compete more directly with us.

If we are unable to recover subscriber acquisition costs with revenue generated from those subscribers, our business and operating results will be harmed.

As of September 30, 2011, we had 142.9 million subscribers to our daily emails, and we expect the number of subscribers
to grow significantly during the remainder of 2011. Acquiring a subscriber base is costly, and the success of our business depends on our ability to generate revenue from new and existing subscribers.
In 2010 and the nine months ended September 30, 2011, we spent $241.5 million and $466.5 million, respectively, on online marketing initiatives relating to subscriber acquisition.
As our subscriber base continues to evolve, it is possible that the composition of our subscribers may change in a manner that makes it more difficult to generate revenue to offset the costs
associated with acquiring new subscribers. For example, if we acquire a large number of new subscribers who are not viewed as an attractive demographic by merchants, we may not be able to generate
compelling products for those subscribers to offset the cost of acquiring those subscribers. If the cost to acquire subscribers is greater than the revenue we generate over time from those
subscribers, our business and operating results will be harmed.

If we are unable to maintain favorable terms with our merchants, our revenue may be adversely affected.

The success of our business depends in part on our ability to retain and increase the number of merchants who use our service.
Currently, when a merchant partners with us to offer a deal for its products or services, it receives an agreed upon percentage of the gross billings from each Groupon sold, and we retain the rest. If
merchants decide that utilizing our services no longer provides an effective means of attracting new customers or selling their goods and services, they may demand a higher percentage of the gross
billings from each Groupon sold. This would adversely affect our revenue.

In
addition, we expect to face increased competition from other internet and technology-based businesses such as Google and Microsoft, each of which has launched initiatives which are
directly competitive to our business. We also have seen that some competitors will accept lower margins, or negative margins, to attract attention and acquire new subscribers. If competitors engage in
group buying

initiatives
in which merchants receive a higher percentage of the gross billings than we currently offer, we may be forced to pay a higher percentage of the gross billings than we currently offer,
which may reduce our revenue.

Our operating cash flow and results of operations could be adversely impacted if we change our merchant payment terms or our gross billings do not continue to grow.

Our merchant payment terms and revenue growth have provided us with operating cash flow to fund our working capital needs. Our merchant
arrangements are generally structured such that we collect cash up front when our customers purchase Groupons and make payments to our merchants at a subsequent date. In North America, we typically
pay our merchants in installments within sixty days after the Groupon is sold. In our International segment, merchants are not paid until the customer redeems the Groupon. Our accrued merchant
payable, which primarily consists of payment obligations to our merchants, has grown, both nominally and as a percentage of gross billings, as our gross billings have increased, particularly the gross
billings from our International segment. Our accrued merchant payable balance increased from $4.3 million as of December 31, 2009 to $465.6 million as of September 30,
2011. This merchant payable balance exceeded our cash and cash equivalents as of September 30, 2011 and contributed to our working capital deficit of $301.1 million as of
September 30, 2011.

We
use the operating cash flow provided by our merchant payment terms and revenue growth to fund our working capital needs. If we offer our merchants more favorable or accelerated
payment terms or our gross billings do not continue to grow in the future, our operating cash flow and results of operations could be adversely impacted and we may have to seek alternative financing
to fund our working capital needs.

Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or a decrease in subscriber willingness to
receive messages could adversely affect our revenue and business.

Our business is highly dependent upon email and other messaging services. Deals offered through emails and other messages sent by us,
or on our behalf by our affiliates, generate a substantial portion of our revenue. Because of the importance of email and other messaging services to our businesses, if we are unable to successfully
deliver emails or messages to our subscribers or potential subscribers, or if subscribers decline to open our emails or messages, our revenue and profitability would be adversely affected. Actions by
third parties to block, impose restrictions on, or charge for the delivery of, emails or other messages could also materially and adversely impact our business. From time to time, internet service
providers block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails or other messages to third parties. In addition, our
use of email and other messaging services to send communications about our website or other matters may result in legal claims against us, which if successful might limit or prohibit our ability to
send emails or other messages. Any disruption or restriction on the distribution of emails or other messages or any increase in the associated costs would materially and adversely affect our revenue
and profitability.

We have a rapidly evolving business model and our new product and service offerings could fail to attract or retain subscribers or generate revenue.

We have a rapidly evolving business model and are regularly exploring entry into new market segments and the introduction of new
products and features with respect to which we may have limited experience. In addition, our subscribers may not respond favorably to our new products and services. These products and services may
present new and significant technology challenges, and we may be subject to claims if subscribers of these offerings experience service disruptions or failures or other quality issues. If products or
services we introduce, such as changes to our websites and applications, the introduction of social networking and location-based marketing elements to our websites, or entirely new lines of business
that we may pursue, fail to engage subscribers or merchants, we may fail to acquire or retain subscribers or generate sufficient revenue or other value to justify our investment, and our business may
be materially

and
adversely affected. Our ability to retain or increase our subscriber base and revenue will depend heavily on our ability to innovate and to create successful new products and services. In
addition, the relative profitability, if any, of our new activities may be lower than that of our historical activities, and we may not generate sufficient revenue from new activities to recoup our
investments in them. If any of this were to occur, it could damage our reputation, limit our growth and negatively affect our operating results.

If we are unable to retain the services of certain individuals involved in the operations of our International segment, our international expansion may suffer.

Our international expansion has been rapid and our international business has become critical to the growth in our revenue and our
ability to achieve profitability. In the nine months ended September 30, 2010 and 2011, 20.4% and 59.3%, respectively, of our revenue was generated from our International segment. We began our
international operations in May 2010 with the acquisition of CityDeal Europe GmbH, or CityDeal, which was founded by Oliver Samwer and Marc Samwer. Since the CityDeal acquisition,
Messrs. Samwer have served as consultants and been extensively involved in the development and operations of our International segment. The agreements under which Oliver and Marc Samwer
provide us with consulting services will expire in October 2012 and October 2013, respectively. In the event Messrs. Samwer do not continue to provide us with consulting services after
the respective termination dates of their agreements, we can make no assurances that the loss of their services will not disrupt our international operations or have an adverse effect on our ability
to grow our international business.

Our international operations are subject to increased challenges, and our inability to adapt to the varied commercial and regulatory landscapes of our international markets
may adversely affect our business.

Further expansion into international markets requires management attention and resources and requires us to localize our services to
conform to a wide variety of local cultures, business practices, laws and policies. The different commercial and internet infrastructure in other countries may make it more difficult for us to
replicate our business model. In many countries, we compete with local companies that understand the local market better than we do, and we may not benefit from first-to-market
advantages. We may not be successful in expanding into particular international markets or in generating revenue from foreign operations. As we continue to expand internationally, we are increasingly
subject to risks of doing business internationally, including the following:



strong local competitors;



different regulatory requirements, including regulation of gift cards and coupon terms, internet services, professional
selling, distance selling, bulk emailing, privacy and data protection, banking and money transmitting, that may limit or prevent the offering of our services in some jurisdictions or prevent
enforceable agreements;



difficulties in integrating with local payment providers, including banks, credit and debit card networks and electronic
funds transfer systems;



different employee/employer relationships and the existence of workers' councils and labor unions;

If, as we continue to expand internationally, we are unable to successfully replicate our business model due to commercial and regulatory constraints in our
international markets, our business may be adversely affected.

The integration of our international operations with our North American technology platform may result in business interruptions.

We currently use a common technology platform in our North America segment to operate our business and are in the process of migrating
our operations in our International segment to the same platform. Such changes to our technology platform and related software carry risks such as cost overruns, project delays and business
interruptions and delays. If we experience a
material business interruption as a result of this process, it could have a material adverse effect on our business, financial position and results of operations and could cause the market value of
our common stock to decline.

An increase in the costs associated with maintaining our international operations could adversely affect our results of operations.

Certain factors may cause our international costs of doing business to exceed our comparable costs in North America. For example, in
some countries, expansion of our business may require a close commercial relationship with one or more local banks, a shared ownership interest with a local entity or registration as a bank under
local law. Such requirements may reduce our revenue, increase our costs or limit the scope of our activities in particular countries.

Further,
as we expand our international operations and have additional portions of our international revenue denominated in foreign currencies, we could become subject to increased
difficulties in collecting accounts receivable and repatriating money without adverse tax consequences and increased risks relating to foreign currency exchange rate fluctuations. Further, we could be
subject to the application of U.S. tax rules to acquired international operations and local taxation of our fees or of transactions on our websites.

We
conduct certain functions, including product development, subscriber support and other operations, in regions outside of North America. Any factors which reduce the anticipated
benefits, including cost efficiencies and productivity improvements, associated with providing these functions outside of North America, including increased regulatory costs associated with our
international operations, could adversely affect our business.

An increase in our refund rates could reduce our liquidity and profitability.

Our "Groupon Promise" states that we will provide our customers with a refund of the purchase price of a Groupon if they believe that
we have let them down. As we increase our revenue, our refund rates may exceed our historical levels. A downturn in general economic conditions may also increase our refund rates. An increase in our
refund rates could significantly reduce our liquidity and profitability.

As
we do not have control over our merchants and the quality of products or services they deliver, we rely on a combination of our historical experience with each merchant and online and
offline research of customer reviews of merchants for the development of our estimate for refund claims. Our actual level of refund claims could prove to be greater than the level of refund claims we
estimate. If our
refund reserves are not adequate to cover future refund claims, this inadequacy could have a material adverse effect on our liquidity and profitability.

Our
standard agreements with our merchants generally limit the time period during which we may seek reimbursement for customer refunds or claims. Our customers may make claims for
refunds with respect to which we are unable to seek reimbursement from our merchants. Our inability to seek reimbursement from our merchants for refund claims could have an adverse effect on our
liquidity and profitability.

If our merchants do not meet the needs and expectations of our subscribers, our business could suffer.

Our business depends on our reputation for providing high-quality deals, and our brand and reputation may be harmed by
actions taken by merchants that are outside our control. Any shortcomings of one or more of our merchants, particularly with respect to an issue affecting the quality of the deal offered or the
products or services sold, may be attributed by our subscribers to us, thus damaging our reputation, brand value and potentially affecting our results of operations. In addition, negative publicity
and subscriber sentiment generated as a result of fraudulent or deceptive conduct by our merchants could damage our reputation, reduce our ability to attract new subscribers or retain our current
subscribers, and diminish the value of our brand.

We cannot assure you that we will be able to manage the growth of our organization effectively.

We have experienced rapid growth in demand for our services since our inception. Our employee headcount and number of subscribers have
increased significantly since our inception, and we expect this growth to continue for the foreseeable future. The growth and expansion of our business and service offerings places significant demands
on our management and our operational and financial resources. We are required to manage multiple relations with various merchants, subscribers, technology licensors and other third parties. In the
event of further growth of our operations or in the number of our third-party relationships, our information technology systems or our internal controls and procedures may not be adequate to support
our operations. To effectively manage our growth, we must continue to implement operational plans and strategies, improve and expand our infrastructure of people and information systems, and train and
manage our employee base.

The loss of one or more key members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our
business.

We currently depend on the continued services and performance of the key members of our management team, including Andrew D.
Mason, our Chief Executive Officer, and Jason E. Child, our Chief Financial Officer. Mr. Mason is one of our founders and his leadership has played an integral role in our growth. The
loss of key personnel, including key members of management as well as our marketing, sales, product development and technology personnel, could disrupt our operations and have an adverse effect on our
ability to grow our business. Moreover, many members of our management are new to our team or have been recently promoted to new roles.

Eric P.
Lefkofsky is one of our founders and has served as the Executive Chairman of our Board of Directors since our inception. Although Mr. Lefkofsky historically has
devoted a significant amount of his business time to Groupon, he is under no contractual or other obligation to do so and may not do so in the future. Mr. Lefkofsky invests his business time
and financial resources in a variety of other businesses, including Lightbank LLC, a private investment firm that Mr. Lefkofsky co-founded with Bradley A. Keywell. Such
investments may be in areas that present conflicts with, or involve businesses related to, our operations. If Mr. Lefkofsky devotes less time to our business in the future, our business may be
adversely affected.

As
we become a more mature company, we may find our recruiting and retention efforts more challenging. We are seeking to hire a significant number of personnel, including certain key
management personnel. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively.

We may be subject to additional unexpected regulation which could increase our costs or otherwise harm our business.

The application of certain laws and regulations to Groupons, as a new product category, is uncertain. These include laws and
regulations such as the Credit Card Accountability Responsibility and Disclosure Act of 2009, or the CARD Act, and unclaimed and abandoned property laws. In addition, from time to

time,
we may be notified of additional laws and regulations which governmental organizations or others may claim should be applicable to our business. For example, we were recently notified by the
Massachusetts Alcoholic Beverages Control Commission that Groupon discounts for some Massachusetts restaurants may not be in compliance with Massachusetts liquor laws and regulations. If
we are required to alter our business practices as a result of any laws and regulations, our revenue could decrease, our costs could increase and our business could otherwise be harmed. In addition,
the costs and expenses associated with defending any actions related to such additional laws and regulations and any payments of related penalties, judgments or settlements could adversely impact our
profitability.

The implementation of the CARD Act and similar state and foreign laws may harm our business and results of operations.

Groupons may be considered gift cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other
laws, the CARD Act, and state laws governing gift cards, stored value cards and coupons. Other foreign jurisdictions have similar laws in place, in particular European jurisdictions where the European
E-Money Directive regulates the business of electronic money institutions. Many of these laws contain provisions governing the use of gift cards, gift certificates, stored value cards or prepaid
cards, including specific disclosure requirements and prohibitions or limitations on the use of expiration dates and the imposition of certain fees. For example, if Groupons are subject to the CARD
Act and are not included in the exemption for promotional programs, it is possible that the purchase value, which is the amount equal to the price paid for the Groupon, or the promotional value, which
is the add-on value of the Groupon in excess of the price paid, or both, may not expire before the later of (i) five years after the date on which the Groupon was issued or the date on which
the subscriber last loaded funds on the Groupon if the Groupon has a reloadable feature; (ii) the Groupon's stated expiration date (if any); or (iii) a later date provided by applicable
state law. We and several merchants with whom we have partnered are currently defendants in 16 purported class actions that have been filed in federal and state court claiming that Groupons are
subject to the CARD Act and various state laws governing gift cards and that the defendants have violated these laws by issuing Groupons with expiration dates and other restrictions. We are also the
defendant to a purported class action in the Canadian province of Ontario in which similar violations of provincial legislation governing gift cards are alleged. In the event that it is determined
that Groupons are subject to the CARD Act or any similar state or foreign law or regulation, and are not within various exemptions that may be available under the CARD Act or under some of the
various state or foreign jurisdictions, our liabilities with respect to unredeemed Groupons may be materially higher than the amounts shown in our financial statements and we may be subject to
additional fines and penalties. In addition, if federal or state laws require that the face value of Groupons have a minimum expiration period beyond the period desired by a merchant for its
promotional program, or no expiration period, this may affect the willingness of merchants to issue Groupons in jurisdictions where these laws apply. If we are required to materially increase the
estimated liability recorded in our financial statements with respect to unredeemed gift cards, our net income could be materially and adversely affected.

If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed Groupons, our net income could be
materially and adversely affected.

In certain states and foreign jurisdictions, Groupons may be considered a gift card. Some of these states and foreign jurisdictions
include gift cards under their unclaimed and abandoned property laws which require companies to remit to the government the value of the unredeemed balance on the gift cards after a specified period
of time (generally between one and five years) and impose certain reporting and recordkeeping obligations. We do not remit any amounts relating to unredeemed Groupons based on our assessment of
applicable laws. The analysis of the potential application of the unclaimed and abandoned property laws to Groupons is complex, involving an analysis of constitutional and statutory provisions and
factual issues, including our relationship with subscribers and merchants and our role as it relates to the issuance and delivery of a Groupon. In the event that one or more states or foreign
jurisdictions

successfully
challenges our position on the application of its unclaimed and abandoned property laws to Groupons, or if the estimates that we use in projecting the likelihood of Groupons being
redeemed prove to be inaccurate, our liabilities with respect to unredeemed Groupons may be materially higher than the amounts shown in our financial statements. If we are required to materially
increase the estimated liability recorded in our financial statements with respect to unredeemed gift cards, our net income could be materially and adversely affected. Moreover, a successful challenge
to our position could subject us to penalties or interest on unreported and unremitted sums, and any such penalties or interest would have a further material adverse impact on our net income.

Government regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially
harm our business and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet and
e-commerce. Existing and future regulations and laws could impede the growth of the internet or other online services. These regulations and laws may involve taxation, tariffs, subscriber
privacy, anti-spam, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services and the
characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the internet as the
vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. In addition, it is
possible that governments of one or more countries may seek to censor content available on our websites and applications or may even attempt to completely block access to our websites. Adverse legal
or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or
more countries, our ability to retain or increase our subscriber base may be adversely affected and we may not be able to maintain or grow our revenue as anticipated.

New tax treatment of companies engaged in internet commerce may adversely affect the commercial use of our services and our financial results.

Due to the global nature of the internet, it is possible that various states or foreign countries might attempt to regulate our
transmissions or levy sales, income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment
of companies engaged in internet commerce. New or revised international, federal, state or local tax regulations may subject us or our subscribers to additional sales, income and other taxes. We
cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the internet. New or revised taxes and, in particular, sales taxes, VAT and similar taxes would
likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the internet. New taxes could also create significant increases in
internal costs necessary to capture data, and collect and remit taxes. Any of these events could have an adverse effect on our business and results of operations.

Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could
adversely affect our business.

A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing and security of
consumer data. The existing privacy-related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various federal, state and foreign legislative and
regulatory bodies may expand current or enact new laws regarding privacy matters. For example, recently there have been Congressional hearings and increased attention to the capture and use of
location-based information relating to users of smartphones and other mobile devices. We have posted privacy policies and practices concerning the collection, use and disclosure of subscriber data on
our websites and applications. Several internet companies have incurred penalties for failing to abide by the representations made in their privacy policies and practices. In addition, several states
have adopted legislation that

requires
businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security
breach. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or
other federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against
us by governmental entities or others or other liabilities, which could adversely affect our business. In
addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and practices could result in a loss of subscribers or merchants and adversely affect our
business. Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of third-party web "cookies" for behavioral advertising. The
regulation of these cookies and other current online advertising practices could adversely affect our business.

We may suffer liability as a result of information retrieved from or transmitted over the internet and claims related to our service offerings.

We may be, and in certain cases have been, sued for defamation, civil rights infringement, negligence, patent, copyright or trademark
infringement, invasion of privacy, personal injury, product liability, breach of contract, unfair competition, discrimination, antitrust or other legal claims relating to information that is published
or made available on our websites or service offerings we make available (including provision of an application programming interface platform for third parties to access our website, mobile device
services and geolocation applications). This risk is enhanced in certain jurisdictions outside the United States, where our liability for such third-party actions may be less clear and we may be less
protected. In addition, we could incur significant costs in investigating and defending such claims, even if we ultimately are not found liable. If any of these events occurs, our net income could be
materially and adversely affected.

We
are subject to risks associated with information disseminated through our websites and applications, including consumer data, content that is produced by our editorial staff and
errors or omissions related to our product offerings. Such information, whether accurate or inaccurate, may result in our being sued by our merchants, subscribers or third parties and as a result our
revenue and goodwill could be materially and adversely affected.

Our business depends on our ability to maintain and scale the network infrastructure necessary to operate our websites and applications, and any significant disruption in
service on our websites or applications could result in a loss of subscribers, customers or merchants.

Subscribers access our deals through our websites and applications. Our reputation and ability to acquire, retain and serve our
subscribers and customers are dependent upon the reliable performance of our websites and applications and the underlying network infrastructure. As our subscriber base and the amount of information
shared on our websites and applications continue to grow, we will need an increasing amount of network capacity and computing power. We have spent and expect to continue to spend substantial amounts
on data centers and equipment and related network infrastructure to handle the traffic on our websites and applications. The operation of these systems is expensive and complex and could result in
operational failures. In the event that our subscriber base or the amount of traffic on our websites and applications grows more quickly than anticipated, we may be required to incur significant
additional costs. Interruptions in these systems, whether due to system failures, computer viruses or physical or electronic break-ins, could affect the security or availability of our
websites and applications, and prevent our subscribers from accessing our services. A substantial portion of our network infrastructure is hosted by third-party providers. Any disruption in these
services or any failure of these providers to handle existing or increased traffic could significantly harm our business. Any financial or other difficulties these providers face may adversely affect
our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide. If we do not maintain or expand our network
infrastructure successfully or if we experience operational failures, we

could
lose current and potential subscribers and merchants, which could harm our operating results and financial condition.

Our business depends on the development and maintenance of the internet infrastructure.

The success of our services will depend largely on the development and maintenance of the internet infrastructure. This includes
maintenance of a reliable network backbone with the necessary speed, data capacity and security, as well as timely development of complementary products, for providing reliable internet access and
services. The internet has experienced, and is likely to continue to experience, significant growth in the number of users and amount of traffic. The internet infrastructure may be unable to support
such demands. In addition, increasing numbers of users, increasing bandwidth requirements or problems caused by viruses, worms, malware and similar programs may harm the performance of the internet.
The backbone computers of the internet have been the targets of such programs. The internet has experienced a variety of outages and other delays as a result of damage to portions of its
infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level of internet usage generally as well as the level of usage of our services, which
could adversely impact our business.

We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.

We regard our subscriber list, trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology and
similar intellectual property as critical to our success, and we rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements with our employees
and others to protect our proprietary rights. Effective intellectual property protection may not be available in every country in which our deals are made available. We also may not be able to acquire
or maintain appropriate domain names or trademarks in all countries in which we do business. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary
rights. We may be unable to prevent third parties from acquiring and using domain names that are similar to, infringe upon or diminish the value of our trademarks and other proprietary rights. We may
be unable to prevent third parties from using and registering our trademarks, or trademarks that are similar to, or diminish the value of, our trademark in some countries.

We
may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our proprietary rights also may take actions that
diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the
steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. We are currently subject
to multiple litigations and disputes related to our intellectual property and service offerings. We may in the future be subject to additional litigation and disputes. The costs of supporting such
litigation and disputes are considerable, and there can be no assurances that favorable outcomes will be obtained.

We
are currently subject to third-party claims that we infringe their proprietary rights or trademarks and expect to be subject to additional claims in the future. Such claims, whether
or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us or the payment of damages by us. We may need to obtain licenses from third
parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in third parties
whose sole or primary business is to assert such claims.

Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, or if we receive unfavorable media coverage, our ability to expand our base
of subscribers and merchants will be impaired and our business and operating results will be harmed.

We believe that the brand identity that we have developed has significantly contributed to the success of our business. We also believe
that maintaining and enhancing the "Groupon" brand is critical to expanding our base of subscribers and merchants. Maintaining and enhancing our brand may require us to make substantial investments
and these investments may not be successful. If we fail to promote and maintain the "Groupon" brand, or if we incur excessive expenses in this effort, our business, operating results and financial
condition will be materially and adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and
expensive. Maintaining and enhancing our brand will depend largely on our ability to be a group buying leader and to continue to provide reliable, trustworthy and high quality deals, which we may not
do successfully.

We
receive a high degree of media coverage around the world. Unfavorable publicity or consumer perception of our websites, applications, practices or service offerings, or the offerings
of our merchants, could adversely affect our reputation, resulting in difficulties in recruiting, decreased revenue and a negative impact on the number of merchants we feature and the size of our
subscriber base, the loyalty of our subscribers and the number and variety of deals we offer each day. As a result, our business, financial condition and results of operations could be materially and
adversely affected.

Acquisitions, joint ventures and strategic investments could result in operating difficulties, dilution and other harmful consequences.

We expect to continue to evaluate and consider a wide array of potential strategic transactions, including acquisitions and
dispositions of businesses, joint ventures, technologies, services, products and other assets and strategic investments. At any given time, we may be engaged in discussions or negotiations with
respect to one or more of these types of transactions. Any of these transactions could be material to our financial condition and results of operations. The process of integrating any acquired
business may create unforeseen operating difficulties and expenditures and is itself risky. The areas where we may face difficulties include:



diversion of management time, as well as a shift of focus from operating the businesses to issues related to integration
and administration, particularly given the number, size and varying scope of our recent acquisitions;



the need to integrate each company's accounting, management, information, human resource and other administrative systems
to permit effective management, and the lack of control if such integration is delayed or not implemented;



the need to implement controls, procedures and policies appropriate for a public company at companies that prior to
acquisition had lacked such controls, procedures and policies;



in some cases, the need to transition operations and subscribers onto our existing platforms; and



liability for activities of the acquired company before the acquisition, including violations of laws, rules and
regulations, commercial disputes, tax liabilities and other known and unknown liabilities.

Moreover,
we may not realize the anticipated benefits of any or all of our acquisitions or joint ventures, or we may not realize them in the time frame expected. Future acquisitions or
joint ventures may require us to issue additional equity securities, spend a substantial portion of our available cash, or incur debt or liabilities, amortize expenses related to intangible assets or
incur write-offs of goodwill, which could adversely affect our results of operations and dilute the economic and voting rights of our stockholders.

Our total number of subscribers may be higher than the number of our actual individual subscribers and may not be representative of the number of persons who are active
potential customers.

Our total number of subscribers may be higher than the number of our actual individual subscribers because some subscribers have
multiple registrations, other subscribers have died or become incapacitated and others may have registered under fictitious names. Given the challenges inherent in identifying these subscribers, we do
not have a reliable system to accurately identify the number of actual individual subscribers, and thus we rely on the number of total
subscribers as our measure of the size of our subscriber base. In addition, the number of subscribers includes the total number of individuals that have completed registration through a specific date,
less individuals who have unsubscribed. The number of subscribers may include individuals who do not receive our emails because our emails have been blocked or are otherwise undeliverable. As a
result, the number of subscribers should not be considered as representative of the number of persons who continue to actively consider our deals by reviewing our email offers.

Our business may be subject to seasonal sales fluctuations which could result in volatility or have an adverse effect on the market price of our common stock.

Our business, like that of our merchants, may be subject to some degree of sales seasonality. As the growth of our business stabilizes,
these seasonal fluctuations may become more evident. Seasonality may cause our working capital cash flow requirements to vary from quarter to quarter depending on the variability in the volume and
timing of sales. These factors, among other things, make forecasting more difficult and may adversely affect our ability to manage working capital and to predict financial results accurately, which
could adversely affect the market price of our common stock.

We depend on the continued growth of online commerce.

The business of selling goods and services over the internet, particularly through coupons, is dynamic and relatively new. Concerns
about fraud, privacy and other problems may discourage additional consumers and merchants from adopting the internet as a medium of commerce. In countries such as the U.S., Germany, the United
Kingdom, France and Japan, where our services and online commerce generally have been available for some time and the level of market penetration of our services is high, acquiring new subscribers for
our services may be more difficult and costly than it has been in the past. In order to expand our subscriber base, we must appeal to and acquire subscribers who historically have used traditional
means of commerce to purchase goods and services and may prefer internet analogues to our offerings, such as the retailer's own website. If these consumers prove to be less active than our earlier
subscribers, or we are unable to gain efficiencies in our operating costs, including our cost of acquiring new subscribers, our business could be adversely impacted.

Our business is subject to interruptions, delays or failures resulting from earthquakes, other natural catastrophic events or terrorism.

Our services, operations and the data centers from which we provide our services are vulnerable to damage or interruption from
earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins and similar events. A significant natural disaster, such as
an earthquake, fire or flood, could have a material adverse impact on our business, financial condition and results of operations and our insurance coverage may be insufficient to compensate us for
losses that may occur. Acts of terrorism could cause disruptions to the internet, our business or the economy as a whole. We may not have sufficient protection or recovery plans in certain
circumstances, such as natural disasters affecting areas where data centers upon which we rely are located, and our business interruption insurance may be insufficient to compensate us for losses that
may occur. Such disruptions could negatively impact our ability to run our websites, which could harm our business.

Our results of operations may be negatively impacted by investments we make as we enter new product and service categories.

We have offered Groupons in over 190 different types of businesses, services and activities that fall into six broad categories. We
intend to continue to invest in the development of our existing categories and to expand into new categories. We may make substantial investments in such new categories in anticipation of future
revenue. We may also face greater competition in specific categories from internet sites that are more focused on such categories. If the launch of a new category requires investments greater than we
expect, if we are unable to generate sufficient merchant offers which are of high quality, value and variety or if the revenue generated from a new category grows more slowly or produces lower revenue
than we expect, our results of operations could be adversely impacted.

Groupons are issued in the form of redeemable coupons with unique identifiers. It is possible that consumers or other third parties
will seek to create counterfeit Groupons in order to fraudulently purchase discounted goods and services from our merchants. While we use advanced anti-fraud technologies, it is possible
that technically knowledgeable criminals will attempt to circumvent our anti-fraud systems using increasingly sophisticated
methods. In addition, our service could be subject to employee fraud or other internal security breaches, and we may be required to reimburse consumers and/or merchants for any funds stolen or revenue
lost as a result of such breaches. Our merchants could also request reimbursement, or stop using Groupon, if they are affected by buyer fraud or other types of fraud.

We
may incur significant losses from fraud and counterfeit Groupons. We may incur losses from claims that the consumer did not authorize the purchase, from merchant fraud, from erroneous
transmissions, and from consumers who have closed bank accounts or have insufficient funds in them to satisfy payments. In addition to the direct costs of such losses, if they are related to credit
card transactions and become excessive, they could potentially result in our losing the right to accept credit cards for payment. If we were unable to accept credit cards for payment, we would suffer
substantial reductions in revenue, which would cause our business to suffer. While we have taken measures to detect and reduce the risk of fraud, these measures need to be continually improved and may
not be effective against new and continually evolving forms of fraud or in connection with new product offerings. If these measures do not succeed, our business will suffer.

We are exposed to fluctuations in currency exchange rates and interest rates.

Because we conduct a significant and growing portion of our business outside the United States but report our financial results in U.S.
dollars, we face exposure to adverse movements in currency exchange rates. Our foreign operations are exposed to foreign exchange rate fluctuations as the financial results are translated from the
local currency into U.S. dollars upon consolidation. If the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions will result in increased
revenue, operating expenses and net income. Similarly, if the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transaction will result in
decreased revenue, operating expenses and net income. As exchange rates vary, sales and other operating results, when translated, may differ materially from expectations. In addition, we face exposure
to fluctuations in interest rates which may impact our investment income unfavorably.

We are subject to payments-related risks.

We accept payments using a variety of methods, including credit card, debit card and gift certificates. As we offer new payment options
to consumers, we may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which
may increase over time and raise our operating costs and lower profitability. We rely on third parties to provide payment processing services, including the processing of

credit
cards and debit cards and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association operating
rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with
these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from consumers or facilitate other types of online
payments, and our business and operating results could be adversely affected.

We
are also subject to or voluntarily comply with a number of other laws and regulations relating to money laundering, international money transfers, privacy and information security and
electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties or forced to cease our payments services business.

Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include Groupons.

Various federal laws, such as the Bank Secrecy Act and the USA PATRIOT Act and foreign laws and regulations, such as the European
Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, impose certain anti-money laundering requirements on companies
that are financial institutions or that provide financial products and services. For these purposes, financial institutions are broadly defined to include money services businesses such as money
transmitters, check cashers and sellers or issuers of stored value cards. Examples of anti-money laundering requirements imposed on financial institutions include subscriber identification
and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we are a financial institution subject to these laws and regulations based, in
part, upon the characteristics of Groupons and our role with respect to the distribution of Groupons to subscribers. However, the Financial Crimes Enforcement Network, a division of the U.S. Treasury
Department tasked with implementing the requirements of the Bank Secrecy Act, recently proposed amendments to the scope and requirements for parties involved in stored value or prepaid access cards,
including a proposed expansion of financial institutions to include sellers or issuers of prepaid access cards. In the event that this proposal is
adopted as proposed, it is possible that a Groupon could be considered a financial product and that we could be a financial institution. In the event that we become subject to the requirements of the
Bank Secrecy Act or any other anti-money laundering law or regulation imposing obligations on us as a money services business, our regulatory compliance costs to meet these obligations
would likely increase which could reduce our net income.

State and foreign laws regulating money transmission could be expanded to include Groupons.

Many states and certain foreign jurisdictions impose license and registration obligations on those companies engaged in the business of
money transmission, with varying definitions of what constitutes money transmission. We do not currently believe we are a money transmitter given our role and the product terms of Groupons. However, a
successful challenge to our position or expansion of state or foreign laws could subject us to increased compliance costs and delay our ability to offer Groupons in certain jurisdictions pending
receipt of any necessary licenses or registrations.

Current uncertainty in global economic conditions could adversely affect our revenue and business.

Our operations and performance depend on worldwide economic conditions, which deteriorated significantly in the United States and other
countries in late 2008 and through 2009. The current economic environment continues to be uncertain. These conditions may make it difficult for our merchants to accurately forecast and plan future
business activities, and could cause our merchants to terminate their relationships with us or could cause our subscribers to slow or reduce their spending. Furthermore, during challenging economic
times, our merchants may face issues gaining timely access to sufficient credit, which could result in their unwillingness to continue with our service. If that were to occur, we may experience

decreased
revenue. If we are unable to finance our operations on acceptable terms as a result of renewed tightening in the credit markets, we may experience increased costs or we may not be able to
effectively manage our business. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, worldwide, in the United States or in our industry. These
and other economic factors could have a material adverse effect on our financial condition and operating results.

Our management team has a limited history of working together and may not be able to execute our business plan.

Our management team has worked together for only a limited period of time and has a limited track record of executing our business plan
as a team. We have recently filled a number of positions in our senior management and finance and accounting staff. Accordingly, certain key personnel have only recently assumed the duties and
responsibilities they are now performing. In addition, certain of our executives have limited experience managing a large global business operation. Accordingly, it is difficult to predict whether our
management team, individually and collectively, will be effective in operating our business.

Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day
management of our business.

The individuals who now constitute our management team have limited experience managing a publicly-traded company and limited
experience complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that
will be subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations will require substantial attention from our senior
management and could divert their attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.

We will incur increased costs as a result of being a public company.

We will face increased legal, accounting, administrative and other costs and expenses as a public company that we do not incur as a
private company. The Sarbanes-Oxley Act of 2002, including the requirements of Section 404, as well as new rules and regulations subsequently implemented by the Securities and Exchange
Commission, or the SEC, the Public Company Accounting Oversight Board and the NASDAQ Global Select Market, impose additional reporting and other obligations on public companies. We expect that
compliance with these public company requirements will increase our costs and make some activities more time-consuming. A number of those requirements will require us to carry out
activities we have not done previously. For example, we will adopt new internal controls and disclosure controls and procedures. In addition, we will incur additional expenses associated with our SEC
reporting requirements. For example, under Section 404 of the Sarbanes-Oxley Act, for our annual report on Form 10-K for our fiscal year ending December 31, 2012, we
will need to document and test our internal control procedures, our management will need to assess and report on our internal control over financial reporting and our independent registered public
accounting firm will need to issue an opinion on the effectiveness of those controls. Furthermore, if we identify any issues in complying with those requirements (for example, if we or our accountants
identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues
could adversely affect us, our reputation or investor perceptions of us. We also expect that it will be difficult and expensive to obtain director and officer liability insurance, and we may be
required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain
qualified persons to serve on our board of directors or as executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in corporate governance and
reporting requirements. We expect that the additional reporting and other obligations imposed on us by these rules and regulations will increase our legal and financial compliance costs and the costs
of our related legal, accounting and administrative activities significantly. These increased costs will require us to divert a significant amount of money that we could otherwise use to expand our
business and achieve our strategic objectives.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

We may in the future be required to raise capital through public or private financing or other arrangements. Such financing may not be
available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. Additional equity financing may dilute the interests of our common stockholders, and
debt financing, if available, may involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to
competitive pressures.

Risks Related to the Securities Markets and Ownership of Our Class A Common Stock

In making your investment decision, you should not rely on a reported statement in a June 2011 news report attributed to our co-founder and Executive Chairman.
You should rely only on statements made in this prospectus in determining whether to purchase our shares.

In a June 5, 2011 news story reported on Bloomberg.com, our co-founder and Executive Chairman was reported to have
stated in a June 3, 2011 interview that "Groupon was going to be wildly profitable." The story and reported statement have been reprinted in various news media outlets. Our Executive Chairman
did not agree to be interviewed for the news story and, through representatives, requested that the statement not be published. The reported statement does not accurately or completely reflect our
Executive Chairman's views and should not be considered by prospective investors in isolation or at all. Prospective investors are cautioned to consider the risks and uncertainties disclosed in this
Risk Factors section and elsewhere in this prospectus.

You
should carefully evaluate all of the information in this prospectus. We have in the past, and may continue to receive, a high degree of media coverage, including coverage that is not
directly attributable to statements made by our officers and employees, incorrectly reports on statements made by our officers or employees or is misleading as a result of omitting to state
information provided by us or our officers or employees. You should rely only on the information contained in this prospectus in determining whether to purchase our shares.

In making your investment decision, you should not rely on an email sent by our Chief Executive Officer to certain employees that was leaked to the media without our
knowledge. The email, which is set forth in Appendix A to this prospectus, should not be considered in isolation and you should make your investment decision only after reading this entire
prospectus carefully.

Information about the Company and our business was included in an email sent by our Chief Executive Officer to certain of our employees
on August 25, 2011. The email was leaked to the media without our knowledge and has been reprinted by a number of news outlets. The email is included as Appendix A to this prospectus.
The email was intended for employees and not prospective investors and, therefore, did not contain the more complete information, including discussion of various risks and uncertainties, described in
this prospectus. The email and its contents,
including the information set forth in Appendix A, should not be considered in isolation and you should make your investment decision only after reading this entire prospectus carefully.

Investors
also should be aware of the following clarifications with respect to the content of the email:



"Revenues" reflected in the email are reported as "gross billings" in this prospectus and represent the amounts collected
from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds.



The email states that our "revenues" (now gross billings) in the U.S. in August 2011 grew by about 12% over the prior
month while we reduced marketing expenses by 20% in the same period. This financial information for August 2011 reflects only the first 21 days of August. For the quarter ended
September 30, 2011, our North American gross billings increased by 8.4% and our marketing

expenses
declined by 20.4% as compared to the prior quarter. See our consolidated financial statements for additional information regarding our financial performance for the nine months ended
September 30, 2011.



References to "ACSOI" refer to Adjusted Consolidated Segment Operating Income, a metric used internally by management to
gauge performance that is discussed in the letter from our Chief Executive Officer on page 33 of this prospectus.



The email discusses that we expect that our subscriber acquisition costs will decline in the future. However, we cannot
assure you that such reductions will not have an adverse impact on our revenue or the extent to which increases in other marketing expenses may offset the impact of such reductions.



The email discusses our joint venture with Tencent in China and indicates that we are making progress towards
profitability. However, there is no assurance as to when, or if, the joint venture will achieve profitability. For the foreseeable future, we do not expect that the joint venture will have a material
impact on our results of operations.



The email notes that some of our new product offerings are doing well and growing fast. However, such product offerings
are very new and any recent success should not be considered to be an indication of results for future periods. Moreover, such product offerings currently do not have a material impact on our results
of operations.



The email presents information with respect to the size of our business relative to certain competitors. Such information
is based on publicly available data as of August 25, 2011 and may not be representative of our market position in future periods.

Our Class A common stock has no prior market. We cannot assure you that our stock price will not decline or not be subject to significant volatility after this
offering.

Before this offering, there has not been a public market for our Class A common stock, and an active public market for our
Class A common stock may not develop or be sustained after this offering. The market price of our Class A common stock could be subject to significant fluctuations after this offering.
The price of our stock may change in response to variations in our operating results and also may change in response to other factors, including factors specific to technology companies, many of which
are beyond our control. In addition, we are offering a smaller percentage of our shares than is typical for an initial public offering. After the offering, our shares may be less liquid than the
shares of other newly public companies and there may be imbalances between supply and demand for our shares. As a result, our share price may experience significant volatility and may not necessarily
reflect the value of our expected performance. Among other factors that could affect our stock price are:



the financial projections that we may choose to provide to the public, any changes in these projections or our failure for
any reason to meet these projections;



the development and sustainability of an active trading market for our Class A common stock;



success of competitive products or services;



the public's response to press releases or other public announcements by us or others, including our filings with the SEC
and announcements relating to litigation;



speculation about our business in the press or the investment community;



future sales of our Class A common stock by our significant stockholders, officers and directors;



changes in our capital structure, such as future issuances of debt or equity securities;

strategic actions by us or our competitors, such as acquisitions or restructurings; and



changes in accounting principles.

In
particular, we cannot assure you that you will be able to resell your shares of our Class A common stock at or above the initial public offering price. The initial public
offering price will be determined by negotiations between the representatives of the underwriters and us.

The concentration of our capital stock ownership with our founders, executive officers and directors and their affiliates will limit your ability to influence corporate
matters.

After this offering, our Class B common stock will have 150 votes per share and our Class A common stock, which is the
stock we are selling in this offering, will have one vote per share. We anticipate that our founders, executive officers, directors and owners of 5% or more of our outstanding capital stock will
together own approximately 60.1% of our outstanding capital stock, representing approximately 74.5% of the voting power of our outstanding capital stock after this offering. In particular, following
this offering, our founders, Eric P. Lefkofsky, Bradley A. Keywell and Andrew D. Mason, will together control 100% of our outstanding Class B common stock and approximately
34.1% of our outstanding Class A common stock, representing approximately 58.1% of the voting power of our outstanding capital stock. Messrs. Lefkofsky, Keywell and Mason will therefore
have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger
or other sale of our company or its assets, for the foreseeable future. In addition, because of this dual class structure, Messrs. Lefkofsky, Keywell and Mason will continue to be able to
control all matters submitted to our stockholders for approval even if they own less than 50% of the outstanding shares of our capital stock. This concentrated control will limit your ability to
influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock could be adversely
affected.

Our
Class A common stock and Class B common stock will automatically convert into a single class of common stock five years after the completion of this offering. See
"Description of Capital StockClass A and Class B Common StockConversion."

Sales of a substantial number of shares of our Class A common stock in the public market after this offering, or the perception
that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. Based on
the total number of shares of our common stock outstanding as of September 30, 2011, upon completion of this offering, we will have 630,403,352 shares of Class A common stock and
2,399,976 shares of Class B common stock outstanding, assuming no exercise of our outstanding options or vesting of our outstanding restricted stock units.

All
of the shares of Class A common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act of 1933, as amended,
or the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. Substantially all of the remaining 600,403,352 shares of Class A
common stock and 2,399,976 shares of Class B common stock outstanding after this offering, based on shares outstanding as of September 30, 2011, will be restricted as a result of
securities laws, lock-up agreements or other contractual restrictions that restrict transfers for at least 180 days after the date of this prospectus (or such earlier date or dates
as agreed between us and Morgan Stanley & Co. LLC), subject to certain extensions.

Morgan
Stanley & Co. LLC may, in its sole discretion, release all or some portion of the shares subject to lock-up agreements prior to expiration of the
lock-up period.

Our
2011 Incentive Plan, which we refer to as the 2011 Plan, allows us to issue, among other things, stock options, stock appreciation rights, restricted stock and restricted stock units
to eligible individuals

(including
our named executive officers). We also have our 2010 Stock Plan, which we refer to as the 2010 Plan, and our 2008 Stock Option Plan, which we refer to as the 2008 Plan. Although no future
awards can be issued under the 2008 Plan (and, following this offering, no future awards will be issued under the 2010 Plan), there are stock options, restricted stock units and restricted stock
awards outstanding under both the 2010 Plan and the 2008 Plan, as well as restricted stock units outstanding under the 2011 Plan. We intend to file a registration statement under the Securities Act as
soon as practicable after the completion of this offering to cover the issuance of shares upon the exercise or vesting of awards granted under those plans. As a result, any shares issued or granted
under the plans after the completion of this offering also will be freely tradable in the public market, subject to lock-up agreements as applicable. If equity securities are issued under
the plans and it is perceived that they will be sold in the public market, then the price of our Class A common stock could decline substantially.

We will have broad discretion in using our net proceeds from this offering, and the benefits from our use of the proceeds may not meet investors' expectations.

Our management will have broad discretion over the allocation of our net proceeds from this offering as well as over the timing of
their use without stockholder approval. We have not yet determined how the net proceeds of this offering will be used, other than for working capital and other general corporate purposes. As a result,
investors will be relying upon management's judgment with only limited information about our specific intentions for the use of our net proceeds from this offering. Our failure to apply these proceeds
effectively could cause our business to suffer.

If securities analysts do not publish research or if securities analysts or other third parties publish inaccurate or unfavorable research about us, the price of our
Class A common stock could decline.

The trading market for our Class A common stock will rely in part on the research and reports that securities analysts and other
third parties choose to publish about us. We do not control these analysts or other third parties. The price of our Class A common stock could decline if one or more securities analysts
downgrade our Class A common stock or if one or more securities analysts or other third parties publish inaccurate or unfavorable research about us or cease publishing reports about us.

Because our existing investors paid substantially less than the initial public offering price when they purchased their shares, new investors will incur immediate and
substantial dilution in their investment.

Investors purchasing shares of Class A common stock in this offering will incur immediate and substantial dilution in net
tangible book value per share because the price that new investors pay will be substantially greater than the net tangible book value per share of the shares acquired. This dilution is due in large
part to the fact that our existing investors paid substantially less than the initial public offering price when they purchased their shares of Class A common stock. In addition, upon the
completion of this offering, there will be options to purchase 18,407,510 shares of our Class A common stock outstanding and restricted stock units with respect to
10,575,100 shares of our Class A common stock, based on the number of such awards outstanding on September 30, 2011. To the extent shares of Class A common stock are issued
with respect to such awards in the future, there will be further dilution to new investors.

The
initial public offering price for the shares sold in this offering was determined by negotiations between us and the representatives of the underwriters and may not be indicative of
prices that will
prevail in the trading market. See "Underwriting" for a discussion of the determination of the initial public offering price.

We do not intend to pay dividends for the foreseeable future.

We intend to retain all of our earnings for the foreseeable future to finance the operation and expansion of our business and do not
anticipate paying cash dividends on our Class A common stock or Class B common stock. As a result, you can expect to receive a return on your investment in our Class A common
stock only if the market price of the stock increases.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our certificate of incorporation and by-laws, as amended and restated prior to the closing of this offering, may have the
effect of delaying or preventing a change of control or changes in our management. These provisions include the following:



Our amended and restated certificate of incorporation provides for a dual class common stock structure for five years
following the completion of this offering. As a result of this structure, our founders will have significant influence over all matters requiring stockholder approval, including the election of
directors, amendments to our charter documents and significant corporate transactions, such as a merger or other sale of our company or its assets. This concentrated control could discourage others
from initiating any potential merger, takeover or other change of control transaction that other stockholders may view as beneficial. Five years after the completion of this offering, our
Class A common stock and Class B common stock will convert into a single class of common stock. Following the conversion, each share of common stock will have one vote per share and the
rights of holders of all outstanding shares of common stock will be identical.



Our board of directors has the right to determine the authorized number of directors and to elect directors to fill a
vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to control the size of or fill vacancies on
our board of directors.



Special meetings of our stockholders may be called only by our Executive Chairman of the Board, our Chief Executive
Officer, our board of directors or holders of not less than the majority of our issued and outstanding capital stock. This limits the ability of minority stockholders to take certain actions other
than at an annual meeting of stockholders.



Our stockholders may not act by written consent unless the action to be effected and the taking of such action by written
consent is approved in advance by our board of directors. As a result, a holder, or holders, controlling a majority of our capital stock would generally not be able to take certain actions without
holding a stockholders' meeting.



Our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors. This
limits the ability of minority stockholders to elect director candidates.



Stockholders must provide timely notice to nominate individuals for election to the board of directors or to propose
matters that can be acted upon at an annual meeting of stockholders. These provisions may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror's own
slate of directors or otherwise attempting to obtain control of our company.



Our board of directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to
authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to
acquire us. In addition, if approved by our board of directors and Class B common stockholders, we may issue authorized but unissued shares of our Class B common stock, without the
approval of our Class A common stockholders, which would decrease the voting power of our outstanding Class A common stock and could impede the success of any attempt to acquire us.

In
addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad
range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder becomes an "interested" stockholder. For a description of our
capital stock, see "Description of Capital Stock."

On
the day of this writing, Groupon's over 10,400 employees offered more than 1,000 daily deals to 142 million subscribers across 45 countries and have sold to date over
125 million Groupons. Reaching this scale in about three years required a great deal of operating flexibility, dating back to Groupon's founding.

Before
Groupon, there was The Pointa website launched in November 2007 after my former employer and one of my co-founders, Eric Lefkofsky, asked me to leave
graduate school so we could start a business. The Point is a social action platform that lets anyone organize a campaign asking others to give money or take action as a group, but only once a "tipping
point" of people agree to participate.

I
started The Point to empower the little guy and solve the world's unsolvable problems. A year later, I started Groupon to get Eric to stop bugging me to find a business model. Groupon,
which started as a side project in October 2008, applied The Point's technology to group buying. By January 2009, its popularity soaring, we had fully shifted our attention to Groupon.

I'm
writing this letter to provide some insight into how we run Groupon. While we're looking forward to being a public company, we intend to continue operating according to the
long-term focused principles that have gotten us to this point. These include:

We aggressively invest in growth.

We spend a lot of money acquiring new subscribers because we can measure the return and believe in the long-term value of
the marketplace we're creating. When we see opportunities to invest in long-term growth expect that we will pursue them regardless of the short-term impact on our
profitability.

We are always reinventing ourselves.

In our early days, each Groupon market featured only one deal per day. The model was built around our limitations: We had a tiny
community of customers and merchants.

As
we grew, we ran into the opposite problem. Overwhelming demand from merchants, with nine-month waiting lists in some markets, left merchant demand unfilled and contributed
to hundreds of Groupon clones springing up around the world. And as our customer base grew larger, our merchants had an entirely new problem: Dealing with too many customers instead of too few.

To
adapt, we increased our investment in technology and released deal targeting, enabling us to feature different deals for different subscribers in the same market based on their
personal preferences. In addition to providing a more relevant customer experience, this helped us to manage the flow of customers and opened the Groupon marketplace to more merchants, in turn
increasing the number and variety of deals offered through our marketplace.

Today,
we are pursuing models of reinvention that would not be possible without the critical mass of customers and merchants we have achieved. Groupon NOW, for example, allows customers
to pull deals on demand for immediate redemption, and helps keep merchants bustling throughout the day.

Expect
us to make ambitious bets in technology and product innovation that distract us from our current business. Some bets we'll get right, and others we'll get wrong, but we think it's
the only way to continuously build exciting products.

We are unusual and we like it that way.

We want the time people spend with Groupon to be memorable. Life is too short to be a boring company. Whether it's with a deal for
something unusual, such as fire dancing classes, or a marketing

campaign
such as Grouspawn(1), we seek to create experiences for our customers that make today different enough from yesterday to justify getting out of bed. While weighted toward the
measurable, our decision-making process also considers what we feel in our gut to be great for our customers and merchants, even if it can't be quantified immediately.

(1)

Grouspawn
is a foundation we created that awards college scholarships to babies whose parents used a Groupon on their first date.

Our customers and merchants are what we care about.

After selling out on our original mission of saving the world to start hawking coupons, in order to live with ourselves, we vowed to
make Groupon a service that people love using. We set out to upturn the stigmas created by traditional discounting services, trusting that nothing would be as crucial to our long-term
success as happy customers and merchants. We put our phone number on our printed Groupons and built a huge customer service operation, manned in part with members of Chicago's improv community. We
developed a sophisticated, multi-stage process to pick deals from high quality merchants with vigorously fact-checked editorial content. We built a dedicated merchant services team that
works with our merchant partners to ensure satisfaction. And we have a completely open return policy, giving customers a refund if they ever feel like Groupon let them down. We do these things to make
our customers and merchants happy, believing that market success will follow.

We
believe that when once-great companies fall, they don't lose to competitors, they lose to themselvesand that happens when they stop focusing on making people
happy. As such, we do not intend to be reactive to competitors. We will watch them, but we won't distract ourselves with decisions that aren't designed primarily to make our customers and merchants
happy.

We don't measure ourselves in conventional ways.

There are three main financial metrics that we track internally.

First,
we track revenueour gross billings less the amounts we pay our merchantsbecause we believe it is the best proxy for the value we're creating. Second, we
measure free cash flow, which is our cash flow from operations, reduced by our capital expenditures. We use this measure as an indicator of our long-term financial stability.

Third,
we track Adjusted Consolidated Segment Operating Income (ACSOI) which is our Consolidated Segment Operating Income (CSOI) reported under U.S. GAAP before our new subscriber
acquisition costs. We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to decline significantly as this
period of rapid expansion in our subscriber base concludes and we determine that the returns on such investment are no longer attractive. While we track this management metric internally to gauge our
performance, we encourage you to base your investment decision on whatever metrics make you comfortable.

If
you're thinking about investing, hopefully it's because, like me, you believe that Groupon is better positioned than any company in history to reshape local commerce. The speed of our
growth reflects the enormous opportunity before us to create a more efficient local marketplace. As with any business in a new industry, success for our investors is not guaranteed. We have yet to
reach sustained profitability and we have no shortage of competition. Our path will include some moments of brilliance and others of sheer stupidity. Knowing that this will at times be a bumpy ride,
we thank you for considering joining us.

This prospectus includes forward-looking statements. All statements other than statements of historical facts contained in this
prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking
statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect" and similar expressions are intended to identify forward-looking statements. We
have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of
operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of
risks, uncertainties and assumptions, including those described in "Risk Factors." Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from
time-to-time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this prospectus may not occur and actual results
could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Factors
that may cause actual results to differ from expected results include, among others:

You
should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover,
neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements
for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

You
should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a
part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

Unless
otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations and market position,
market
opportunity and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets
for our offerings. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party
information. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In
addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and
risk due to a variety of factors, including those described in "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in
the estimates made by the independent parties and by us.

We estimate that our net proceeds from the sale of the Class A common stock in this offering will be approximately
$478.8 million, assuming an initial public offering price of $17.00 per share, which is the midpoint of the range reflected on the cover page of this prospectus, and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters' option to purchase additional shares in this offering is exercised in full, we estimate that
our net proceeds will be approximately $551.5 million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase or
decrease in the assumed initial public offering price of $17.00 per share would increase or decrease the net proceeds to us from the offering by approximately $28.5 million, assuming the number
of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of one
million shares in the number of shares of Class A common stock offered by us would increase or decrease the net proceeds to us from this offering by approximately $16.2 million, assuming
the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

As
of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds of this offering. However, we intend to use the net proceeds from this
offering for working capital and other general corporate purposes, which may include the acquisition of other businesses, products or technologies; however, we do not have any commitments for any
acquisitions at this time. Based on our current cash and cash equivalents, together with cash generated from operations, we do not expect that we will utilize any of the net proceeds of this offering
to fund operations, including online marketing expenses, during the next twelve months. We will have broad discretion in the way we
use the net proceeds. Pending use of the net proceeds as described above, we intend to invest the net proceeds in money market funds and investment grade debt securities.

DIVIDEND POLICY

We declared dividends on our preferred stock in the amounts of $0.3 million, $5.6 million and $1.4 million in
2008, 2009 and 2010, respectively. We declared dividends on our common stock in the amount of $21.3 million in 2009. We did not declare any dividends on our common stock in 2008 or 2010. We
currently do not anticipate paying any cash dividends on our Class A common stock or Class B common stock in the foreseeable future. Any future determination to declare cash dividends
will be made at the discretion of our board of directors, subject to applicable laws and will depend on our financial condition, results of operations, capital requirements, general business
conditions and other factors that our board of directors may deem relevant.

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2011
on:



an actual basis;



a pro forma basis giving effect to (i) a two-for-one forward stock split of our voting common stock and non-voting
common stock that occurred on October 31, 2011; (ii) the recapitalization of all outstanding shares of our capital stock (other than outstanding shares of our Series B preferred
stock) into 600,403,352 shares of Class A common stock and all outstanding shares of our Series B preferred stock into 2,399,976 shares of Class B common stock that
occurred on October 31, 2011 immediately following the two-for-one forward stock split; and (iii) the amendment and restatement of our certificate of incorporation that occurred on
October 31, 2011; and



a pro forma as adjusted basis giving further effect to the sale by us of Class A common stock in this offering at
an assumed initial public offering price of $17.00 per share, which is the midpoint of the range reflected on the cover page of this prospectus, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.

The
information below is illustrative only and our cash and cash equivalents and capitalization following the completion of this offering will be based on the actual initial public
offering price and other terms of this offering determined at pricing. You should read this table together with "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and our consolidated financial statements and related notes included elsewhere in this prospectus.

Each
$1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share would increase (decrease) the amount of pro forma as
adjusted cash and cash equivalents, additional paid-in capital, total Groupon, Inc. stockholders' equity and total capitalization we receive from this offering by approximately
$28.5 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of one million shares in the number of shares of Class A common stock offered by us would increase
(decrease) cash and cash equivalents, additional paid-in capital, total Groupon, Inc. stockholders' equity and total capitalization by approximately $16.2 million, assuming the
assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If you invest in our Class A common stock, your investment will be diluted immediately to the extent of the difference between
the public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our Class A and Class B common stock after this offering.
Our pro forma net tangible book value as of September 30, 2011 was a deficit of approximately $234.9 million, or $(0.39) per share of Class A and Class B common stock. Pro
forma net tangible book value per share represents the amount of our total tangible assets, less our total liabilities, divided by the number of shares of Class A and Class B common
stock outstanding as of September 30, 2011, after giving effect to a two-for-one forward stock split that occurred on October 31, 2011 and the recapitalization of all outstanding shares
of our capital stock (other than outstanding shares of our Series B preferred stock) into 600,403,352 shares of Class A common stock and all
outstanding shares of our Series B preferred stock into 2,399,976 shares of Class B common stock that occurred on October 31, 2011 immediately following the two-for-one
forward stock split.

Net
tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of Class A common stock in this
offering and the pro forma net tangible book value per share of Class A and Class B common stock immediately after the completion of this offering. After giving effect to our sale of
shares of Class A common stock in this offering at an assumed initial public offering price of $17.00 per share, which is the midpoint of the range set forth on the cover page of this
prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of September 30, 2011
would have been $243.9 million, or $0.39 per share. This represents an immediate increase in net tangible book value of $0.78 per share to existing stockholders and an immediate dilution in net
tangible book value of $16.61 per share to investors purchasing Class A common stock in this offering, as illustrated in the following table:

Assumed initial public offering price per share of Class A common stock

$

17.00

Pro forma net tangible book value per share as of September 30, 2011

$

(0.39

)

Increase per share attributable to this offering

$

0.78

Pro forma net tangible book value per share, as adjusted to give effect to this offering

$

0.39

Dilution per share to new investors

$

16.61

A
$1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, would
increase (decrease) our pro forma as adjusted net tangible book value per share by $0.05, assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus
and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If
the underwriters exercise their option to purchase additional shares of our Class A common stock in full, the pro forma as adjusted net tangible book value per share would be
$0.50 per share, the increase in pro forma net tangible book value per share to existing stockholders would be $0.89 per share and the dilution per share to new investors purchasing shares in this
offering would be $16.50 per share.

The following table presents, on a pro forma basis as of September 30, 2011, after giving effect to (i) the sale of 30,000,000 shares of Class A common stock;
(ii) a two-for-one forward stock split that occurred on October 31, 2011; and (iii) the recapitalization of all of our capital stock (other than outstanding shares of our
Series B preferred stock) into 600,403,352 shares of Class A common stock and all outstanding shares of our Series B preferred stock into 2,399,976 shares of
Class B common stock that occurred on October 31, 2011 immediately following the two-for-one forward stock split, the differences between the existing stockholders and the purchasers of
shares in this offering with respect to the number of shares purchased from us, the total consideration paid and the average price paid per share:

A
$1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, would
increase (decrease) total consideration paid by new investors by $30.0 million, total consideration paid by all stockholders by $30.0 million and the average price per share paid by all
stockholders by $0.05, in each case assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and without deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us.

The
foregoing calculations are based on 600,403,352 shares of our Class A common stock and 2,399,976 shares of Class B common stock outstanding as of
September 30, 2011 and exclude:



18,407,510 shares of Class A common stock issuable upon the exercise of stock options outstanding as of
September 30, 2011 at a weighted average exercise price of $1.11 per share;



10,575,100 shares of Class A common stock issuable upon the vesting of restricted stock units;



2,694,358 shares of Class A common stock available for additional grants under our 2010 Plan; and



49,974,998 shares of Class A common stock available for additional grants our 2011 Plan, which we adopted
effective August 17, 2011.

If
the underwriters' over-allotment option is exercised in full, the number of shares held by the existing stockholders after this offering would be 602,803,328, or 94.6% of the total
number of shares of our Class A and Class B common stock outstanding after this offering, and the number of shares held by new investors would increase to 34,500,000, or 5.4% of the
total number of shares of our Class A and Class B common stock outstanding after this offering.

To
the extent that any outstanding options are exercised or outstanding restricted stock units vest, new investors will experience further dilution.

The following table presents selected consolidated financial and other data as of and for the periods indicated. Financial information
for periods prior to 2008 has not been provided because we began operations in 2008. The statements of operations data for the years ended December 31, 2008, 2009 and 2010 and the balance sheet
data as of December 31, 2009 and 2010 are derived from our audited financial statements included elsewhere in this prospectus. The balance sheet data for the year ended December 31, 2008
was derived from our unaudited financial statements which are not included in this prospectus. The summary consolidated statements of operations data for the periods ended September 30, 2010
and 2011 and the balance sheet data as of September 30, 2011 have been derived from our unaudited consolidated financials statements included elsewhere in this prospectus. The unaudited
information was prepared on a basis consistent with that used to prepare
our audited financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of the unaudited period.

We
made several acquisitions during 2010, including the acquisitions of CityDeal, Qpod.inc., Ludic Labs, Inc. and Mobly, Inc. The consolidated statements of operations, balance sheets
and statements of cash flows include the results of entities acquired from the effective date of the acquisition for accounting purposes.

The
following information should be read together with the more detailed information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and our consolidated financial statements and the accompanying notes.

The
Consolidated Financial Statements have been restated for the presentation of revenue on a net basis for the years ended December 31, 2008, 2009
and 2010. See Note 2 to our Consolidated Financial Statements.

(2)

Unaudited
pro forma net loss per share gives effect to (i) a two-for-one forward stock split of our voting common stock and non-voting common stock
that occurred on October 31, 2011; (ii) the recapitalization of all outstanding shares of our capital stock (other than outstanding shares of our Series B preferred stock) into
shares of Class A common stock and all outstanding shares of our Series B preferred stock into shares of Class B common stock that occurred on October 31, 2011 immediately
following the two-for-one forward stock split; and (iii) the amendment and restatement of our certificate of incorporation on October 31, 2011.

(3)

Consolidated
segment operating (loss) income, or CSOI, is a non-GAAP financial measure. See "Selected Consolidated Financial and Other
DataNon-GAAP Financial Measures" for a reconciliation of this measure to the most applicable financial measure under U.S. GAAP. We do not allocate stock-based compensation and
acquisition-related expenses to the segments. See Note 14 "Segment Information" of Notes to Consolidated Financial Statements and Note 14
"Segment Information" of Notes to Condensed Consolidated Financial Statements (Unaudited) for additional information.

Year Ended December 31,

Nine Months Ended
September 30,

2008

2009

2010

2010

2011

Operating Metrics:

Gross billings (in thousands)(1)

$

94

$

34,082

$

745,348

$

330,079

$

2,754,633

Subscribers(2)

*

1,807,278

50,583,805

21,369,608

142,865,836

Cumulative customers(3)

*

375,099

9,031,807

4,623,267

29,504,314

Featured merchants(4)

*

2,695

66,289

31,190

190,795

Groupons sold(5)

*

1,248,792

30,296,070

14,060,589

93,629,524

Average revenue per subscriber(6)

*

$

8.0

$

11.9

$

12.1

$

11.6

Average cumulative Groupons sold per customer(7)

*

3.3

3.5

3.3

4.2

Average revenue per Groupon sold(8)

*

$

11.6

$

10.3

$

10.0

$

11.9

Cumulative repeat customers(9)

*

162,323

4,483,976

2,186,791

16,045,533

*

Not
available

(1)

Reflects
the gross amounts collected from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds, in the applicable
period.

(2)

Reflects
the total number of subscribers who had a Groupon account on the last day of the applicable period, less individuals who have unsubscribed. May
include individual subscribers with multiple registrations because the information we collect from subscribers does not permit us to identify when a subscriber may have created multiple accounts, nor
do we prevent subscribers from creating multiple accounts.

(3)

Reflects
the total number of unique customers who have purchased Groupons from January 1, 2009 through the end of the applicable period. May include
individual customers with multiple registrations. Also may include individuals who do not receive our email offers because our emails have been blocked or are otherwise undeliverable.

For
periods after March 31, 2011, reflects the total number of unique merchants featured in the applicable period. For periods prior to
March 31, 2011, reflects the total number of merchant deals featured in the applicable period because data as to unique merchants is not available for those periods.

(5)

Reflects
the total number of Groupons sold in the applicable period.

(6)

Reflects
the average revenue generated per average number of subscribers in the applicable period.

(7)

Reflects
the average number of Groupons sold per cumulative customer from January 1, 2009 through the end of the applicable period.

(8)

Reflects
the average revenue generated per Groupon sold in the applicable period.

(9)

Reflects
the total number of unique customers who have purchased more than one Groupon from January 1, 2009 through the end of the applicable period.

As of December 31,

As of
September 30,
2011

2008

2009

2010

(unaudited)

(unaudited)

(in thousands, other than per share amounts)

Consolidated Balance Sheet Data:

Cash and cash equivalents

$

2,966

$

12,313

$

118,833

$

243,935

Working capital (deficit)

2,643

3,988

(196,564

)

(301,050

)

Total assets

3,006

14,962

381,570

795,567

Total long-term liabilities





1,621

44,507

Redeemable preferred stock

4,747

34,712





Cash dividends per common share



0.063





Total Groupon, Inc. stockholders' (deficit) equity

(2,091

)

(29,969

)

8,077

(14,696

)

Non-GAAP Financial Measures

We use free cash flow and consolidated segment operating (loss) income, or CSOI, as key non-GAAP financial measures. Free
cash flow and CSOI are used in addition to and in conjunction with results presented in accordance with U.S. GAAP and should not be relied upon to the exclusion of U.S. GAAP financial measures.

Free
cash flow, which is reconciled to "Net cash (used in) provided by operating activities," is cash flow from operations reduced by "Purchases of property and equipment." We use free
cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it typically will present a more conservative measure
of cash flows as purchases of fixed assets, software developed for internal use and website development costs are a necessary component of ongoing operations.

Free
cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not include
the cash payments for business acquisitions. In addition, free cash flow reflects the impact of the timing difference between when we are paid by customers and when we pay merchants. Therefore, we
believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.

CSOI
is the consolidated operating (loss) income of our two segments, North America and International, adjusted for acquisition-related costs and stock-based compensation expense.
Acquisition-related costs are non-recurring, non-cash items related to certain of our acquisitions. Stock-based compensation expense is a non-cash item. We do not
allocate stock-based compensation and acquisition-related expenses to the segments. See Note 14 "Segment Information" of Notes to Consolidated Financial Statements and Note 14 "Segment
Information" of Notes to Condensed Consolidated Financial Statements (Unaudited) for additional information.

We
consider CSOI to be an important measure for management to evaluate the performance of our business as it excludes certain non-cash expenses. We believe it is important to
view CSOI as a complement to our entire consolidated statements of operations. When evaluating our performance, you should consider CSOI as a complement to other financial performance measures,
including various cash flow metrics, net loss and our other U.S. GAAP results.

The following is a reconciliation of free cash flow to the most comparable U.S. GAAP measure, "Net cash (used in) provided by operating
activities," for the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2010 and 2011:

Year Ended December 31,

Nine Months Ended
September 30,

2008

2009

2010

2010

2011

(in thousands)

Net cash (used in) provided by operating activities

$

(1,526

)

$

7,510

$

86,885

$

34,966

$

129,511

Purchases of property and equipment

(19

)

(290

)

(14,681

)

(6,092

)

(29,825

)

Free cash flow

$

(1,545

)

$

7,220

$

72,204

$

28,874

$

99,686

CSOI

The following is a reconciliation of CSOI to the most comparable U.S. GAAP measure, "loss from operations," for the years ended
December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2010 and 2011:

Year Ended December 31,

Nine Months Ended
September 30,

2008

2009

2010

2010

2011

(in thousands)

Loss from operations

$

(1,632

)

$

(1,077

)

$

(420,344

)

$

(84,215

)

$

(218,414

)

Adjustments:

Stock-based compensation(1)

24

115

36,168

8,739

60,922

Acquisition-related(2)





203,183

37,844

(4,793

)

Total adjustments

24

115

239,351

46,583

56,129

CSOI

$

(1,608

)

$

(962

)

$

(180,993

)

$

(37,632

)

$

(162,285

)

(1)

Represents
non-cash stock-based compensation expense recorded within cost of revenue, marketing and selling, general and administrative expense.

(2)

Primarily
represents non-cash charges for remeasurement of the fair value of contingent consideration related to acquisitions made by us in
2010. The amount of the charge in 2010 was due to the significant increase in the value of our common stock from the original acquisition date until the date the contingency was ultimately settled.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated financial statements and the related
notes included elsewhere in this prospectus. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently
anticipate as a result of many factors, including those we describe under "Risk Factors" and elsewhere in this prospectus. See "Special Note Regarding Forward-Looking Statements and Industry Data."

Overview

Groupon is a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a
discount. Traditionally, local merchants have tried to reach consumers and generate sales through a variety of methods, including the yellow pages, direct mail, newspaper, radio, television and online
advertisements and promotions. By bringing the brick and mortar world of local commerce onto the internet, Groupon is creating a new way for local merchants to attract customers and sell goods and
services. We provide consumers with savings and help them discover what to do, eat, see and buy in the places where they live and work.

Each
day we email our subscribers discounted offers for goods and services that are targeted by location and personal preferences. Consumers access our deals directly through our
websites and mobile applications. Our revenue is the purchase price paid by the customer for the Groupon less an agreed upon percentage of the purchase price paid to the featured merchant. In 2010, we
generated revenue of $312.9 million, compared to $14.5 million in 2009. For the nine months ended September 30, 2011, we generated revenue of $1,118.3 million, compared to
$140.7 million for the nine months ended September 30, 2010. The increases in revenue were partially due to our rapid international expansion during 2010, which included our acquisition
of CityDeal. Revenue from our international operations was $112.5 million and $662.9 million in 2010 and the nine months ended September 30, 2011, respectively.

We
have organized our operations into two principal segments: North America, which represents the United States and Canada, and International, which represents the rest of our global
operations. For the nine months ended September 30, 2011, we derived 59.3% of our revenue from our International segment, compared to 20.4% for the nine months ended September 30, 2010.
We expect the percentage of revenue derived from outside North America to continue to increase in future periods as we continue to expand globally.

We
incurred a net loss of $214.5 million for the nine months ended September 30, 2011 and have an accumulated deficit of $633.9 million as of September 30,
2011. Since our inception, we have driven our growth through substantial investments in infrastructure and marketing to drive subscriber acquisition. In particular, our net loss for the nine months
ended September 30, 2011 was driven primarily by the rapid expansion of our International segment during the period, which involved investing heavily in upfront marketing, sales and
infrastructure related to the build out of our operations in South Korea, Australia and Japan. We intend to continue to pursue a strategy of significant investment in these regions and elsewhere in
the future, consistent with the strategy we previously employed in North America and Europe.

Changes in Statements of Operations Presentation

We revised certain aspects of our Statements of Operations presentation. Most significantly, we changed our reporting of revenue from
Groupons sold to be net of the amounts related to merchant fees. Historically, we reported the gross amounts billed to our customers as revenue. We are now presenting that information as "gross
billings." All prior periods through June 30, 2011 have been revised to reflect this net presentation. This change resulted in a reduction of previously reported revenue and corresponding
reductions in cost of revenue in those periods. The change in Statements of Operations presentation had no effect on pre-tax loss or net loss for any period presented.

The
change in presentation reflects, in our view, the challenges that participants in new industries confront in the application of accounting standards. It does not impact in any
respect the scope or nature

of
our business. We previously reported our revenue as essentially the amount of cash collected from the sale of Groupons, less deductions for refunds and discounts. Now, we are presenting revenue as
the amount of cash collected from the sale of Groupons, less applicable merchant payments. We historically referred to that amount as "gross profit." We consistently have stated that the amount we
retainrather than bill or collectfrom the sale of Groupons is the key measure of the value we create. This change in presentation is consistent with that belief.

How We Measure Our Business

We measure our business with several financial and operating metrics. We use these metrics to assess the progress of our business, make
decisions on where to allocate capital, time and technology investments, and assess the longer-term performance of our marketplace. The key metrics are as follows:

Financial Metrics



Revenue. Our revenue is the purchase price paid by the
customer for the Groupon less an agreed upon percentage of the purchase price paid to the featured merchant. We believe revenue is an important indicator for our business because it is a reflection of
the value of our service to our merchants. Revenue as a percentage of gross billings is influenced by the mix of national and local deals we offer.



Free cash flow. Free cash flow is cash flow from
operations less amounts paid for purchases of property and equipment, including internal-use software and website development. We believe free cash flow is an important indicator for our
business because it measures the amount of cash we generate after spending on marketing, wages and benefits, capital expenditures and other items. Free cash flow also reflects changes in working
capital. We use free cash flow to conduct and evaluate our business because we believe free cash flow captures the cash flow of our ongoing operations. Free cash flow is a non-GAAP financial measure.
See "Selected Consolidated Financial and Other DataNon-GAAP Financial Measures" for further information and a reconciliation to the most applicable financial measure under
U.S. GAAP.



Consolidated segment operating (loss) income. CSOI is the
consolidated operating (loss) income of our two segments, North America and International. As reported under U.S. GAAP, we do not allocate stock-based compensation and acquisition-related
expense to our segments. We use CSOI to allocate resources and evaluate performance internally. See Note 14 "Segment Information" of Notes to
Consolidated Financial Statements and Note 14 "Segment Information" of Notes to Condensed Consolidated Financial Statements (Unaudited) for
additional information. CSOI is a non-GAAP financial measure. See "Selected Consolidated Financial and Other DataNon-GAAP Financial Measures" for further information and a reconciliation
to the most applicable financial measure under U.S. GAAP.

Operating Metrics



Gross billings. This metric represents the gross amounts
collected from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds, in a given time period. We consider this metric to be an important indicator of our growth and
business performance as it measures the dollar volume of transactions through our marketplace. Tracking gross billings also allows us to track changes in the percentage of gross billings that we are
able to retain after payments to our merchants. Gross billings are not equivalent to revenues or any other financial metric presented in our consolidated financial statements.



Subscribers. We define subscribers as the total number of
individuals that have completed registration through a specific date, less individuals who have unsubscribed. To sign up for our service and become a subscriber, an individual provides an email
address. We can measure our overall growth in the market as well as our potential revenue opportunity as a function of our total subscriber base. The subscriber base does not take into consideration
the activity level of the

subscriber
with our service, nor does it adjust for multiple or unused accounts. Despite these drawbacks, we believe this metric provides valuable insight about the trajectory and scale of our
business. Although the vast majority of our revenue comes from subscribers, we also sell Groupons to customers that purchase as guests and, as such, are not included in our total subscriber number.



Cumulative customers. We define cumulative customers as
the total number of unique customers that have purchased Groupons from January 1, 2009 (the first date we began tracking unique customers) through a specific date. We consider this metric to be
an important indicator of our business performance as it helps us to understand the purchase rate of our subscribers.



Featured merchants. This metric represents the total
number of merchants featured in a given time period. For deals offered on a nationwide basis, we count the national merchant once. For deals offered by national merchants on a local or regional basis,
we count the national merchant as a separate merchant in each market in which the deal is offered. For periods after March 31, 2011, this metric reflects the total number of unique merchants
featured in the applicable period. For periods prior to March 31, 2011, this metric reflects the total number of merchant deals featured in the applicable period because data as to unique
merchants is not available for those periods. We consider this metric to be a good indicator of growth as well as an important measure of the effectiveness of our sales and marketing infrastructure.



Groupons sold. This metric represents the total number of
Groupons sold in a given time period. This metric is presented net of Groupons refunded during the same time period. We use this metric to measure our growth and activity level in the aggregate as
well as in our individual markets.



Average revenue per subscriber. This metric represents the
average revenue generated per average number of subscribers in a given time period. This metric is presented as the total revenue generated in a given time period, divided by the average number of
subscribers during such period. Although this metric is difficult to evaluate in light of our rapid subscriber growth, we believe that this measure is an indicator of subscriber activity level.



Average cumulative Groupons sold per customer. This metric
represents the average number of Groupons sold per cumulative customer from January 1, 2009 through a specified date. This metric is presented as the total number of Groupons sold in a given
time period, divided by the total number of cumulative customers at the end of such period. We consider this metric to be an important indicator of our business performance as it helps us to
understand the purchase rate of our customers.



Average revenue per Groupon sold. This metric represents
the average revenue generated per Groupon sold in a given time period. This metric is presented as the total revenue generated in a given time period, divided by the number of Groupons sold in such
time period. Although we believe total revenue, not average revenue per Groupon sold, is a better indicator of the overall growth of our marketplace, average revenue per Groupon sold provides an
opportunity to evaluate whether our growth is primarily driven by volume of sales or the prices of Groupons.



Cumulative repeat customers. We define cumulative repeat
customers as unique customers who have purchased more than one Groupon from January 1, 2009 (the first date we began tracking unique customers) through a specified date. In light of our limited
operating history, the vast majority of our subscribers and customers registered or made their initial purchase of a Groupon within the past 12 months. Accordingly, this metric is currently
difficult to evaluate. Over time, however, we expect this metric will be an indicator of our business performance as it will help us to understand the purchase activity of our customers.

Reflects
the gross amounts collected from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds, in the applicable
period.

(2)

Reflects
the total number of subscribers who had a Groupon account on the last day of the applicable period, less individuals who have unsubscribed. May
include individual subscribers with multiple registrations because the information we collect from subscribers does not permit us to identify when a subscriber may have created multiple accounts, nor
do we prevent subscribers from creating multiple accounts. Also may include individuals who do not receive our email offers because our emails have been blocked or are otherwise undeliverable.

(3)

Reflects
the total number of unique customers who have purchased Groupons from January 1, 2009 through the end of the applicable period. May include
individual customers with multiple registrations.

(4)

For
periods after March 31, 2011, reflects the total number of unique merchants featured in the applicable period. For periods prior to
March 31, 2011, reflects the total number of merchant deals featured in the applicable period because data as to unique merchants is not available for those periods.

(5)

Reflects
the total number of Groupons sold in the applicable period.

(6)

Reflects
the average revenue generated per average number of subscribers in the applicable period.

(7)

Reflects
the average number of Groupons sold per cumulative customer from January 1, 2009 through the end of the applicable
period.

(8)

Reflects
the average revenue generated per Groupon sold in the applicable period.

(9)

Reflects
the total number of unique customers who have purchased more than one Groupon from January 1, 2009 through the end of the applicable period.

Factors Affecting Our Performance

Subscriber acquisition costs. We must continue to acquire and retain subscribers who purchase Groupons in order to increase revenue and
achieve
profitability. We characterize online marketing expenses as subscriber acquisition costs because these expenses are intended to acquire new subscribers. We spent $466.5 million on online
marketing initiatives relating to subscriber acquisition for the nine months ended September 30, 2011 and expect to continue to expend significant amounts to acquire additional subscribers.
Over time, we believe we will reach the conclusion that the resources presently being devoted to online marketing initiatives are not yielding sufficiently attractive investment returns due to a
variety of factors such as changes in subscriber economics, achievement of subscriber saturation levels in various markets or a determination that subscriber growth objectives can be satisfied though
alternative means. As a result of such factors, we anticipate significantly decreasing the amount of such investments. We do not believe that this decrease in our online marketing initiatives will
adversely impact our ongoing business with existing customers or subscribers as the related expenses are not designed to drive transactions with such customers and subscribers.

If
consumers do not perceive our Groupon offerings to be of high value and quality, or if we fail to introduce new or more relevant deals, we may not be able to acquire or retain
subscribers. In our limited operating history, we have not incurred significant marketing or other expense on initiatives designed to re-activate subscribers or increase the level of
purchases by our existing subscribers. If such expenditures or

initiatives
become necessary to maintain a desired level of activity in our marketplace, our business and profitability could be adversely affected.

Deal sourcing and quality. We consider our merchant relationships to be a vital part of our business model. We depend on our ability to
attract and
retain merchants that are prepared to offer products or services on compelling terms. We do not have long-term arrangements to guarantee availability of deals that offer attractive
quality, value and variety to consumers or favorable payment terms to us. In light of our significant merchant pool and our objective to promote variety in our daily deals, our general practice to
date has been to limit repeat merchants. If new merchants do not find our marketing and promotional services effective, or if our existing merchants do not believe that utilizing our services provides
them with a long-term increase in customers, revenue or profit, they may stop making offers through our marketplace.

Competitive pressure. Our growth and geographical expansion have drawn a significant amount of attention to our business model. As a
result, a
substantial number of group buying sites that attempt to replicate our business model have emerged around the world. In addition to such competitors, we expect to increasingly compete against other
large internet and technology-based businesses, such as Google and Microsoft, each of which has launched initiatives which are directly competitive to our business. We also expect to compete against
other internet sites that are focused on specific communities or interests and offer coupons or discount arrangements related to such communities or interests.

Investment in growth. We are a high-growth company and have aggressively invested, and intend to continue to invest, to support this
growth. As a result, we have incurred net losses in the majority of quarters since our inception. We anticipate that our operating expenses will increase substantially in the foreseeable future as we
continue to increase the number and variety of deals we offer each day, broaden our subscriber base, expand our marketing channels, expand our operations, hire additional employees and develop our
technology.

Pace and effectiveness of expansion. We have grown our business rapidly since inception, adding new subscribers and markets both
domestically and
internationally. Our international operations have become critical to our revenue growth and our ability to achieve profitability. For the nine months ended September 30, 2010 and 2011, 20.4%
and 59.3%, respectively, of our revenue was generated from our international operations. Expansion into international markets requires management attention and resources and requires us to localize
our services to conform to a wide variety of local cultures, business practices, laws and policies. International acquisitions also expose us to a variety of execution risks. The different commercial
and internet infrastructure in other countries may make it more difficult for us to replicate our traditional business model.

Basis of Presentation

Revenue

Revenue primarily consists of the net amount we retain from the sale of Groupons after paying an agreed upon percentage of the purchase
price to the featured merchant, excluding any applicable taxes and net of estimated refunds.

Cost of Revenue

Cost of revenue is composed of direct and indirect costs incurred to generate revenue, including costs related to credit card
processing fees, refunds provided to customers under the Groupon Promise, certain technology costs, editorial costs and other processing fees. Credit card and other processing fees are expensed as
incurred. At the time of sale, we record a liability for estimated costs to provide refunds under the Groupon Promise based upon historical experience. Technology costs in cost of revenue consist of
payroll and stock-based compensation expense related to our technology support personnel who are responsible for operating and maintaining the infrastructure of our existing website. Such technology
costs also include website hosting and email distribution costs. Editorial costs consist of the payroll and stock-

based
compensation expense related to our editorial personnel, as such staff is primarily dedicated to drafting and promoting merchant deals.

Marketing

Marketing expense consists primarily of targeted online marketing costs, such as sponsored search, advertising on social networking
sites, email marketing campaigns, loyalty programs, affiliate programs and, to a lesser extent, offline marketing costs such as television, radio and print advertising. Marketing payroll costs,
including related stock-based compensation expense, are also classified as marketing expense. We record these costs in marketing expense in our consolidated statements of operations when incurred. No
costs included in marketing expense are incurred in connection with the fulfillment of our obligations to our merchants.

Marketing
is the primary method by which we acquire subscribers, and as such, is a critical part of our growth strategy.

Selling, General and Administrative

Selling expenses reported within selling, general and administrative on the consolidated statements of operations consist of payroll
and sales commissions for inside and outside
sales representatives as well as costs associated with supporting the sales function such as technology, telecommunications and travel. General and administrative expenses consist of payroll and
related expenses for employees involved in general corporate functions, including accounting, finance, tax, legal and human relations, among others. Additional costs included in general and
administrative include subscriber service and operations, amortization and depreciation expense, rent, professional fees and litigation costs, travel and entertainment, stock compensation expense,
charitable contributions, recruiting, office supplies, maintenance and other general corporate costs.

Acquisition-Related

In May 2010, we acquired CityDeal, a European-based collective buying power business launched in January 2010 that provided daily deals
and online marketing services substantially similar to the Company. As part of the overall consideration paid, we were obligated to issue additional shares of our common stock in December 2010 due to
the achievement of financial and performance earn-out targets. We recorded a liability on our consolidated balance sheet as of the original acquisition date for this consideration and
subsequently remeasured the liability on a periodic basis until final settlement. As a result of this remeasurement, we recorded a total charge of $204.2 million in acquisition-related expenses
in 2010, which was partially offset by other nominal acquisition-related items.

Similarly,
in 2011, as part of the overall consideration payable in connection with certain acquisitions, we may be obligated to issue additional shares of our common stock and make cash
payments if certain financial and performance earn-out targets are achieved. We recorded a liability on our consolidated balance sheet as of the original acquisition date for this
consideration and subsequently remeasured the liability as of September 30, 2011. As a result of this remeasurment, we recorded a net gain of $4.8 million in the third quarter of 2011.
These liabilities have not yet been settled and are subject to future remeasurement.

Interest and Other Income (Expense)

Interest and other income (expense) primarily consists of foreign currency gains and losses resulting from foreign currency
transactions which are denominated in currencies other than our functional currencies and interest expense on our loans from related parties.

For the nine months ended September 30, 2010 and 2011, our gross billings were $330.1 million and
$2,754.6 million, respectively, reflecting an increase of $2,424.5 million, or 735%.

Revenue

Revenue for each of the periods presented was as follows:

Nine Months Ended September 30,

2010

% of total

2011

% of total

(dollars in thousands)

North America

$

112,049

79.6

%

$

455,342

40.7

%

International

28,668

20.4

%

662,924

59.3

%

Revenue

$

140,717

100.0

%

$

1,118,266

100.0

%

Revenue
increased by $977.6 million to $1,118.3 million for the nine months ended September 30, 2011 as compared to the nine months ended
September 30, 2010.

North America

North America segment revenue increased by $343.3 million to $455.3 million for the nine months ended
September 30, 2011 as compared to the nine months ended September 30, 2010. The increase was directly attributable to the increase in the number of Groupons we sold in the period
compared to the same period of the prior year. The increase in the number of Groupons sold was driven by subscriber growth in our existing markets and our entry into new domestic markets, which led to
an overall increase in gross billings. We retained less of the gross billings paid by our customers on a percentage basis, which we refer to as deal margin, in the nine months ended
September 30, 2011 compared with the nine months

ended
September 30, 2010. The lower deal margins were primarily due to the mix of offered deals. We launched several new channels including travel (Groupon Getaways), event tickets (Groupon
Live) and consumer products (Groupon Goods). These new channels had lower deal margins than our standard featured daily deals. Over time, we expect our deal margins in these new channels to improve.

International

International segment revenue increased by $634.2 million to $662.9 million for the nine months ended
September 30, 2011 as compared to the nine months ended September 30, 2010. In May 2010, we began our international expansion by acquiring CityDeal, which added 1.9 million
subscribers as of the date of the acquisition in several major European markets, including London, Berlin and Paris, and we ended the year with operations in 38 countries. As a result of the
entry into these new markets and growth in existing markets, we added 85.1 million new subscribers from September 30, 2010 through September 30, 2011.

Due
to the increase in our subscriber base, our gross billings increased. This increase was directly attributable to the increase in the number of Groupons we sold in the period compared
to the same period of the prior year. We retained an amount of the gross billings paid by our customers in the nine months ended September 30, 2011 that was generally consistent on a percentage
basis with the percentage of gross billings retained in the nine months ended September 30, 2010. We offer fewer national deals in our International segment as compared to our North America
segment. As a result, we experienced overall higher deal margins in our International segment than our North America segment.

Cost of revenue

Cost of revenue increased by $144.9 million to $162.6 million for the nine months ended September 30, 2011 as
compared to the nine months ended September 30, 2010. The increase in cost of revenue was directly related to our growth in merchant transaction volume. Additionally, we have increased our
technology and editorial staffing as we continue to grow.

Marketing

Marketing expense as a percentage of gross billings for the nine months ended September 30, 2010 and September 30, 2011
was 27.2% and 22.3%, respectively. We evaluate our marketing expense as a percentage of gross billings because it gives us an indication of how well our marketing spend is driving volume. Our
marketing expense increased by $523.5 million to $613.2 million for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010. This
increase was primarily driven by investments in subscriber acquisition in new markets, along with increasing our marketing staff to support our global marketing efforts. We have focused the majority
of our marketing spend online, particularly on display advertising networks, as part of our new subscriber acquisition strategy. Our subscriber loyalty and rewards program also contributed to our
increase in marketing expense as many of these programs were not put in place until the second half of 2010. For the nine months ended September 30, 2011, marketing expense as a percentage of
gross billings for the North America and International segments was 20.0% and 23.7%, respectively. The higher marketing expense as a percentage of gross billings for our International segment reflects
our launch into new international markets, which requires higher marketing costs to establish a strong initial subscriber base. We believe that our marketing investments in our International segment
will continue to be significant as a percentage of gross billings in the foreseeable future, but will decline as those markets begin to mature.

Selling, General and Administrative

Our selling, general and administrative expense increased by $485.9 million to $565.7 million for the nine months ended
September 30, 2011 as compared to September 30, 2010. The increase in selling, general and administrative expense was principally related to the build out of our salesforce and
investments in our corporate infrastructure necessary to support our current and anticipated growth.

Wages and benefits (excluding stock-based compensation) increased by $271.3 million to $306.6 million for the nine months ended September 30, 2011 as compared to
September 30, 2010, as we continued to add administrative staff to support our business. Stock-based compensation costs also increased to $59.4 million for the nine months ended
September 30, 2011 from $8.6 million for the nine months ended September 30, 2010 due to awards issued to retain key employees and awards issued in connection with our
acquisitions. Depreciation and amortization expense increased in total for the nine months ended September 30, 2011 as compared to September 30, 2010 primarily because we recorded
$29.8 million of intangible assets in connection with acquisitions and domain name purchases from September 30, 2010 through September 30, 2011, which accounted for a majority of
the $14.1 million of amortization expense for the nine months ended September 30, 2011. In addition, selling, general and administrative expense was negatively impacted for the nine
months ended September 30, 2011 as a result of accruals for ongoing litigation.

Acquisition-Related

During the nine months ended September 30, 2011, we acquired several companies that were either technology-based consulting
companies or other group buying companies in an effort to increase our competitive advantage both domestically and internationally. As part of the overall consideration payable in connection with
these acquisitions, we may be obligated to issue additional shares of our common stock and make cash payments if certain financial and performance earn-out targets are achieved. We
recorded a liability on our consolidated balance sheet as of the original acquisition date for this consideration and subsequently remeasured the liability as of September 30, 2011. As a result
of this remeasurment, we recorded a net gain of $4.8 million in the third quarter of 2011. These liabilities have not yet been settled and are subject to future remeasurement.

Loss from operations

Loss from operations increased by $134.2 million to $218.4 million for the nine months ended September 30, 2011 as
compared to the nine months ended September 30, 2010.

North America

Segment operating results for our North America segment changed by $24.9 million from operating income of $11.5 million
to an operating loss of $13.4 million for the nine months ended September 30, 2010 and 2011, respectively.

International

Segment operating loss for our International segment increased by $99.7 million to $148.8 million for the nine months
ended September 30, 2011 as compared to the nine months ended September 30, 2010. The increase in our International segment loss from operations was driven by our rapid expansion in the
segment during the period, which involved investing heavily in upfront marketing, sales and infrastructure related to the build out of our operations in South Korea, Australia and Japan.

Interest and Other Income (Expense)

For the nine months ended September 30, 2010 and 2011, we had $2.0 million and $5.9 million of foreign currency
gains, respectively. Additionally, for the nine months ended September 30, 2011, we recognized approximately $4.9 million in other income related to the redemption of
400,000 shares of non-voting common stock from a former executive officer.

Provision (Benefit) for Income Taxes

We recorded a benefit for income taxes of $4.5 million for the nine months ended September 30, 2010 as we were able to
benefit from losses in certain foreign jurisdictions. For the nine months ended September 30, 2011, we recorded a provision for income taxes of $9.5 million due to income earned by
certain international entities during the period. This provision is primarily due to income earned by certain international entities during the period. The provision is net of a $14.4 million
benefit from the full release of the valuation allowance for those jurisdictions. The effective tax rate from continuing operations, which is calculated as the provision (benefit) for income taxes as
a percent
of pretax losses, for the nine months ended September 30, 2011 and 2010 was (0.04) percent and 0.05 percent, respectively.

For the years ended December 31, 2008, 2009 and 2010, our gross billings were $0.1 million, $34.1 million and
$745.3 million, respectively, reflecting growth rates of 36,157% and 2,087%, respectively, as compared to the corresponding prior year.

Revenue

Revenue for each of the years presented was as follows:

Year Ended December 31,

2008

% of total

2009

% of total

2010

% of total

(dollars in thousands)

North America

$

5

100.0

%

$

14,540

100.0

%

$

200,412

64.0

%

International









112,529

36.0

%

Revenue

$

5

100.0

%

$

14,540

100.0

%

$

312,941

100.0

%

2010 compared to 2009. Revenue increased by $298.4 million to $312.9 million for the year ended December 31, 2010 as
compared to
the year ended December 31, 2009.

North America

North America segment revenue increased by $185.9 million to $200.4 million for the year ended December 31, 2010
as compared to the year ended December 31, 2009. As the average revenue per Groupon remained relatively consistent year-to-year, the overall increase in revenue was directly

attributable
to the increase in the number of Groupons that we sold. The increase in the number of Groupons sold was driven by subscriber growth in our existing markets and our entry into new markets.
During 2010, we added 124 new North American markets and 48.8 million new subscribers.

International

International segment revenue was $112.5 million for the year ended December 31, 2010. In 2010, we began our
international expansion by acquiring CityDeal, which added 1.9 million subscribers as of the date of the acquisition in several major European markets, including London, Berlin and Paris. We
ended the year with operations in 38 countries. Additionally, as compared to our North America segment, we were able to retain more of the gross billings paid by our customers. This deal margin
is negotiated with merchants and is generally higher for our International segment because we offer fewer national deals compared to the North America segment.

2009 compared to 2008. In 2009, our revenue increased from less than $0.1 million to $14.5 million, an increase of 2,907%.
2009 was our
first full year of operations, and during the period we added 29
North American markets and 1.8 million new subscribers. Significant markets entered in 2009 included Boston, Los Angeles and New York.

In
addition to expanding the scale of our business domestically and internationally through acquisitions and entering new markets, several other initiatives have driven revenue growth
over the last three years. We increased our total marketing spend significantly, focusing on acquiring subscribers through online channels such as social networking websites and search engines. We
also added substantially to our salesforce, allowing us to increase the number of merchant relationships, the volume of deals we offer on a daily basis on our websites and the quality of deals we
offer to our subscribers.

Cost of Revenue

For the years ended December 31, 2010, 2009 and 2008, our cost of revenue was $42.9 million, $4.7 million and
$0.1 million, respectively.

2010 compared to 2009. Cost of revenue increased by $38.2 million to $42.9 million for the year ended December 31, 2010
as
compared to the year ended December 31, 2009. The increase in cost of revenue was primarily driven by a $19.6 million increase in credit card processing fees and $8.6 million
increase in customer refunds provided under the Groupon Promise. Increases in these customer refunds and credit card processing and other fees are both driven by higher merchant transaction volumes.
Cost of revenue also increased due to significant additions to our editorial staff and increased email distribution costs as a result of our larger subscriber base.

2009 compared to 2008. Cost of revenue increased by $4.6 million to $4.7 million for the year ended December 31, 2009
compared
to the year ended December 31, 2008. The increase in cost of revenue was primarily driven by a $3.3 million increase in customer refunds provided under the Groupon Promise and a
$1.1 million increase in credit card and other processing fees. Increases in these customer refunds and credit card and other processing fees are both driven by higher merchant transaction
volumes.

Marketing

Marketing expense as a percentage of gross billings for the years ended December 31, 2009 and 2010 was 14.8% and 39.0%,
respectively. We evaluate our marketing expense as a percentage of gross billings because it gives us an indication of how well our marketing spend is driving volume.

2010 compared to 2009. In 2010, our marketing expense increased by $285.5 million to $290.6 million, an increase of 5,650%.
The
significant increase was primarily attributable to an increase in online marketing spend, particularly on display advertising networks as part of our new subscriber acquisition strategy. Our
subscriber loyalty and rewards program also contributed significantly to our increase in marketing expense as many of these programs were not put in place until the second half of

2010.
In addition, we increased our marketing staff to support our global marketing efforts. For the year ended December 31, 2010, marketing expense as a percentage of gross billings for the
North America and International segments was 26.0% and 61.8%, respectively. In 2010, we made significant marketing investments in our International segment to accelerate growth and establish our
presence in new markets. As a result, we experienced much larger operating losses for our International segment than we did for our North America segment.

2009 compared to 2008. In 2009, our marketing expense increased by $4.9 million to $5.1 million, an increase of 3,000%.
Marketing
expense as a percentage of revenue for the year ended December 31, 2008 is not indicative of normal operating levels due to the small number of transactions processed in 2008, as we started
selling Groupons in October 2008.

Selling, General and Administrative

The increases in selling, general and administrative expense were principally related to the build out of our salesforce and
investments in our corporate infrastructure necessary to support our current and anticipated growth. Over time, as our operations mature in a greater percentage of our markets, we expect that our
selling, general and administrative expense will decrease as a percentage of gross billings.

2010 compared to 2009. In 2010, our selling, general and administrative expense increased by $190.8 million to $196.6 million,
an
increase of 3,262%. As described below, the increase in selling, general and administrative expense for the year ended December 31, 2010 compared to the year ended December 31, 2009 was
due to increases in wages and benefits, consulting and professional fees and depreciation and amortization expenses. Additionally, the selling, general and administrative expenses as a percentage of
gross billings for our International segment were significantly higher than for our North America segment, which contributed to larger operating losses in our International segment. This was primarily
a result of the build out of our international operations, including our salesforce, to support future revenue growth. We expect that over time selling, general and administrative expenses for our
International segment will decline as a percentage of gross billings for the segment.

Wages
and benefits (excluding stock-based compensation) increased by $75.2 million to $78.6 million in the year ended December 31, 2010 as we continued to add sales
and administrative staff to support our business. Stock-based compensation costs also increased to $35.9 million for the year ended December 31, 2010 from $0.1 million for the
year ended December 31, 2009 due to awards issued to retain key employees and awards issued in connection with our acquisitions. Our consulting and professional fees increased in 2010 primarily
related to higher legal and technology-related costs. Depreciation and amortization expense increased in 2010 primarily because we recorded $47.3 million of intangible assets in connection with
our acquisitions, resulting in $11.0 million of amortization expense.

2009 compared to 2008. In 2009, our selling, general and administrative expense increased by $4.5 million to $5.8 million, an
increase
of 322%.

Loss from Operations

2010 compared to 2009. Loss from operations increased by $419.3 million to $420.3 million for the year ended December 31,
2010
as compared to the year ended December 31, 2009.

North America

Segment operating loss for our North America segment increased by $9.5 million to $10.4 million for the year ended
December 31, 2010 as compared to the year ended December 31, 2009. The increase in the loss from operations was primarily attributable to our expansion within North America. We invested
heavily in upfront marketing, sales and infrastructure related to the build out of our operations in the domestic markets.

Segment operating loss for our International segment was $170.6 million for the year ended December 31, 2010. We entered
into the international market in 2010. The International segment operating loss was driven by our rapid expansion in the segment during the period. We invested heavily in upfront marketing, sales and
infrastructure related to the build out of our operations in the international markets.

2009 compared to 2008. For the years ended December 31, 2008 and 2009, our loss from operations was $1.6 million and
$1.1 million, respectively, reflecting a decrease of $0.5 million, or 34.0%. The decrease in the loss from operations was primarily attributable to our revenue growth of 290,700% in our
North America segment during 2009.

Acquisition-Related

In May 2010, we acquired CityDeal, a European-based collective buying power business similar to ours. As part of the overall
consideration paid, we were obligated to issue additional shares of our common stock in December 2010 due to the achievement of financial and performance earn-out targets. We
recorded a liability on our consolidated balance sheet
as of the original acquisition date for this consideration and subsequently remeasured the liability on a periodic basis until final settlement. As a result of this remeasurement, we recorded a total
expense of $204.2 million as acquisition-related expenses, which was partially offset by other nominal acquisition-related items.

Interest and Other Income (Expense)

For the year ended December 31, 2010 we had other income of $0.5 million related to foreign currency gains. We did not
incur any foreign currency gains or losses for the years ended December 31, 2008 and 2009 as we did not have any international operations until 2010. We also recorded $0.4 million of
interest expense for the year ended December 31, 2010 related to interest on loans from related parties.

Provision (Benefit) for Income Taxes

We recorded a benefit for income taxes of $6.7 million for the year ended December 31, 2010, as we were able to benefit
from losses in certain foreign jurisdictions, compared to a $248,000 provision for income taxes for the year ended December 31, 2009.

The following table represents data from our unaudited statements of operations and our key operating metrics for our most recent 10
quarters. You should read the following table in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. The results of operations of any
quarter are not necessarily indicative of the results that may be expected for any future period.

Three Months Ended

June 30,
2009

Sept. 30,
2009

Dec. 31,
2009

Mar. 31,
2010

June 30,
2010

Sept. 30,
2010

Dec. 31,
2010

Mar. 31,
2011

June 30,
2011

Sept. 30,
2011

(Restated)

(Restated)

(Restated)

(Restated)

(Restated)

(Restated)

(Restated)

(Restated)

(Restated)

(unaudited)
(dollars in thousands)

Consolidated Statements of Operations Data:

Revenue

$

1,209

$

3,996

$

9,252

$

20,272

$

38,666

$

81,779

$

172,224

$

295,523

$

392,582

$

430,161

Income (loss) from operations

$

17

$

848

$

(1,626

)

$

8,571

$

(36,819

)

$

(55,967

)

$

(336,129

)

$

(117,148

)

$

(101,027

)

$

(239

)

Net income (loss) attributable to Groupon, Inc.

$

21

$

850

$

(1,903

)

$

8,551

$

(35,929

)

$

(49,032

)

$

(313,230

)

$

(102,668

)

$

(101,240

)

$

(10,573

)

Other Financial Data:

Income (loss) from operations

$

17

$

848

$

(1,626

)

$

8,571

$

(36,819

)

$

(55,967

)

$

(336,129

)

$

(117,148

)

$

(101,027

)

$

(239

)

Adjustments:

Stock-based compensation(1)

12

29

64

116

3,960

4,663

27,429

18,864

38,718

3,340

Acquisition-related(2)









9,434

28,410

165,339





(4,793

)

Total adjustments

12

29

64

116

13,394

33,073

192,768

18,864

38,718

(1,453

)

CSOI(3)

$

29

$

877

$

(1,562

)

$

8,687

$

(23,425

)

$

(22,894

)

$

(143,361

)

$

(98,284

)

$

(62,309

)

$

(1,692

)

North America

$

29

$

877

$

(1,562

)

$

8,687

$

(378

)

$

3,160

$

(21,905

)

$

(21,778

)

$

(10,501

)

$

18,836

International









(23,047

)

(26,054

)

(121,456

)

(76,506

)

(51,808

)

(20,528

)

CSOI

$

29

$

877

$

(1,562

)

$

8,687

$

(23,425

)

$

(22,894

)

$

(143,361

)

$

(98,284

)

$

(62,309

)

$

(1,692

)

Operating Metrics:

Gross billings (in thousands)(4)

$

3,301

$

10,002

$

20,526

$

44,383

$

91,424

$

194,272

$

415,269

$

668,174

$

929,249

$

1,157,210

Subscribers(5)

152,203

627,051

1,807,278

3,434,610

10,445,521

21,369,608

50,583,805

83,100,006

115,717,299

142,865,836

Cumulative customers(6)

43,014

153,471

375,099

874,017

2,379,611

4,623,267

9,031,807

15,803,995

23,072,600

29,504,314

Featured merchants(7)

212

765

1,644

2,903

9,565

18,722

35,099

56,781

78,466

78,649

Groupons sold(8)

116,231

340,471

764,869

1,760,398

4,062,458

8,237,733

16,235,481

28,094,743

32,525,739

33,009,042

Average revenue per subscriber(9)

$

15.9

$

10.3

$

7.6

$

7.7

$

5.6

$

5.1

$

4.8

$

4.4

$

3.9

$

3.3

Average cumulative Groupons sold per customer(10)

3.3

3.2

3.3

3.4

3.0

3.3

3.5

3.8

4.0

4.2

Average revenue per Groupon sold(11)

$

10.4

$

11.7

$

12.1

$

11.5

$

9.5

$

9.9

$

10.6

$

10.5

$

12.1

$

13.0

Cumulative repeat customers(12)

14,857

59,398

162,323

420,667

1,056,966

2,186,791

4,483,976

8,195,412

12,066,676

16,045,533

(1)

Represents
non-cash stock-based compensation expense recorded within selling, general and administrative expenses.

(2)

Primarily
represents non-cash charges for remeasurement of the fair value of contingent consideration related to acquisitions made by us in 2010. The amount
of the charge was due to the significant increase in the value of our common stock from the original acquisition date until the date the contingency was ultimately settled.

(3)

Consolidated
segment operating (loss) income, or CSOI, is a non-GAAP financial measure. See "Selected Consolidated Financial and Other
DataNon-GAAP Financial Measures" for a reconciliation of this measure to the most applicable financial measure under U.S. GAAP. We do not allocate stock-based compensation and
acquisition-related expense to the segments. See Note 14 "Segment Information" of Notes to Consolidated Financial Statements and Note 14
"Segment Information" of Notes to Condensed Consolidated Financial Statements (Unaudited) for additional information.

(4)

Reflects
the gross amounts collected from customers for Groupons sold, excluding any applicable taxes and net of estimated refunds, in the applicable
period.

(5)

Reflects
the total number of subscribers who had a Groupon account on the last day of the applicable period, less individuals who have unsubscribed. May
include individual subscribers with multiple registrations because the information we collect from subscribers does not permit us to identify when a subscriber may have created multiple accounts, nor
do we prevent subscribers from creating multiple accounts. Also may include individuals who do not receive our email offers because our emails have been blocked or are otherwise undeliverable.

(6)

Reflects
the total number of unique customers who have purchased Groupons from January 1, 2009 through the end of the applicable period. May include
individual customers with multiple registrations.

(7)

For
periods after March 31, 2011, reflects the total number of unique merchants featured in the applicable period. For periods prior to
March 31, 2011, reflects the total number of merchant deals featured in the applicable period because data as to unique merchants is not available for those periods.

(8)

Reflects
the total number of Groupons sold in the applicable period.

(9)

Reflects
the average revenue generated per average number of subscribers in the applicable period.

(10)

Reflects
the average number of Groupons sold per cumulative customer from January 1, 2009 through the end of the applicable period.

(11)

Reflects
the average revenue generated per Groupon sold in the applicable period.

(12)

Reflects
the total number of unique customers who have purchased more than one Groupon from January 1, 2009 through the end of the applicable
period.

Our gross billings for the third quarter of 2011 increased 496% year-over-year to $1,157.2 million from $194.3 million in
the third quarter of 2010. On a sequential quarterly basis, our gross billings increased 24.5% from $929.2 million in the second quarter of 2011 to $1,157.2 million in the third quarter
of 2011.

Revenue

Our revenue for the third quarter of 2011 increased 426% year-over-year to $430.2 million from $81.8 million in the third
quarter of 2010. On a sequential quarterly basis, our revenue increased 9.6% from $392.6 million in the second quarter of 2011 to $430.2 million in the third quarter of 2011. We retained
less of the gross billings paid by our customers on a percentage basis in the third quarter of 2011 compared with the second quarter of 2011. This was the result of a change in deal mix within the
quarter. In the third quarter of 2011, we launched several new channels, including travel (Groupon Getaways), live concerts and events (Groupon Live) and consumer products (Groupon Goods). These new
channels had lower deal margins than our standard featured daily deals. Over time, we expect our deal margins in these new channels to improve.

Consolidated Segment Operating (Loss) Income

Our consolidated segment operating (loss) income, or CSOI, for the third quarter of 2011 improved by $60.6 million from a
$62.3 million loss in the second quarter of 2011 to a $1.7 million loss in the third quarter of 2011. North America segment operating (loss) income improved by 279% from a
$10.5 million loss in the second quarter of 2011 to $18.8 million of income in the third quarter of 2011. International segment operating loss improved by 60.4% from a
$51.8 million loss in the third quarter of 2011 to a $20.5 million loss in the third quarter of 2011. The improvement in North America segment operating income was the result of our
ability to decrease marketing expense, while still driving customer growth, which resulted in higher revenue in the quarter. In addition, we were able to increase our operating expenses at a lower
rate than our revenue growth. The International segment had similar improvements, however, its results were adversely affected by the continued investment in our less mature markets, such as South
Korea, Australia and Japan. CSOI is a non-GAAP financial measure. See "Selected Consolidated Financial and Other DataNon-GAAP Financial Measures" for further
information and a reconciliation to the most applicable financial measure under U.S. GAAP.

Quarterly Trends

Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors. We have experienced exceptional
growth since our inception as well as significant changes in our business. For instance, we have entered into many new markets, made several international acquisitions, and increased our merchant and
subscriber base over the last three years. These changes have resulted in substantial growth in revenue and corresponding increases in operating costs and expenses to support our growth. Our growth
has led to uneven overall operating results due to differences in the terms and types of deals that we offer, changes in our investment in marketing from quarter-to-quarter,
increases in employee headcount and the impact of our acquisitions. We have determined in the past, and expect to continue to determine in the future, to undertake substantial marketing expense
increases when we perceive opportunities to enter new markets or penetrate existing markets more deeply. The return on these investments is generally achieved in future periods and, as a result, these
investments can adversely impact near term results. For example, although we generated net income in the first quarter of 2010, we subsequently pursued a much more aggressive growth strategy,
including rapid international expansion, acquisitions and a substantial increase in our marketing expenses. This has resulted in losses from operations for the three months ended September 30,
2010, December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011.

In
addition, our business is directly affected by the behavior of our merchants and subscribers. Economic conditions and competitive pressures can positively and negatively impact the
types of deals that we can offer and the rate at which they are purchased. Consequently, the results of any prior quarterly or annual periods should not be relied upon as indications of our future
operating performance.

Liquidity and Capital Resources

As of September 30, 2011, we had $243.9 million in cash and cash equivalents, which primarily consisted of cash and money
market accounts.

Since our inception, we have funded our working capital requirements and expansion primarily through private sales of common and preferred stock, yielding net proceeds of
$1,112.9 million. We used $941.7 million of the proceeds from these sales to redeem shares of our common and preferred stock, and the remainder to fund acquisitions and for working
capital and general corporate purposes. We used a significant portion of the net proceeds received from our private offerings to redeem shares because management and the board of directors determined
that projected cash flow from future operations would be sufficient to support our growth strategy. As a result, we have funded our working capital requirements primarily with cash flow from
operations to date. We generated positive cash flow from operations for the years ended December 31, 2009 and December 31, 2010 and the nine months ended September 30, 2011
despite experiencing net losses in each of these periods, and we expect annual cash flow from operations to remain positive in the foreseeable future. We generally use this cash flow to fund our
operations, make additional acquisitions, make capital expenditures and meet our other cash operating needs. Cash flow from operations was $7.5 million for the year ended December 31,
2009, $86.9 million for the year ended December 31, 2010 and $129.5 million for the nine months ended September 30, 2011.

Although
we can provide no assurances, we believe that the net proceeds from this offering, together with our available cash and cash equivalents balance and cash generated from
operations, should be sufficient to meet our working capital requirements and other capital expenditures for the next twelve months.

Anticipated Uses of Cash

Our priority in 2011 is to continue to increase our revenue by increasing the dollar volume of transactions that are processed through
our marketplace, coupled with expansion and penetration into new domestic and international markets.

In
our North America segment, we intend to continue to invest to acquire subscribers, to expand our salesforce and aggressively market our products. We also intend to acquire or make
strategic investments in complementary businesses that add to our subscriber or customer base or provide incremental technology.

In
our International segment, we also intend to continue to invest to acquire subscribers, to expand our salesforce and aggressively market our products. We also intend to acquire or
make strategic investments in complementary businesses that add to our subscriber or customer base or provide incremental technology.

In
order to support our overall global expansion, we expect to make significant investments in our corporate facilities and information technology infrastructure, with approximately
$65.0 million of capital expenditures planned for the year ending December 31, 2011.

We
currently plan to fund these expenditures in our North America and International segments with cash flows generated from the respective operations during this period. We also may use
a portion of the net proceeds from this offering to fund these expenditures. We do not intend to pay dividends in the foreseeable future.

Our net cash flow from operating, investing and financing activities for the periods below were as follows:

Year Ended December 31,

Nine Months Ended
September 30,

2008

2009

2010

2010

2011

(in thousands)

Cash provided by (used in):

Operating activities

$

(1,526

)

$

7,510

$

86,885

$

34,966

$

129,511

Investing activities

(19

)

(1,961

)

(11,879

)

(104

)

(120,667

)

Financing activities

4,408

3,798

30,445

20,144

120,292

Effect of changes in exchange rates on cash and cash equivalents





1,069

1,316

(4,034

)

Net increase in cash and cash equivalents

$

2,863

$

9,347

$

106,520

$

56,322

$

125,102

Cash Provided By (Used In) Operating Activities

Cash provided by (used in) operating activities primarily consists of our net loss adjusted for certain non-cash items,
including depreciation and amortization, stock-based compensation, deferred income taxes, acquisition-related expenses, gain on redemption of shares and the effect of changes in working capital and
other items.

Our
current merchant arrangements are structured such that we collect cash up front when our customers purchase Groupons and make payments to most of our merchants at a subsequent date.
Under our traditional merchant payment model, we pay our merchants in installments over a period of generally sixty days for all Groupons purchased. Under this payment model, merchants are paid
regardless of whether the Groupon is redeemed. Under the redemption payment model, which we utilize in most of our international operations in conformity with local market practice, merchants are not
paid until the customer redeems the Groupon that has been purchased. If a customer does not redeem the Groupon under this payment model, we retain all of the gross billings for the Groupon purchase.
As a result of these payment models, we experience swings in merchant payable that can cause volatility in working capital levels and impact cash balances more or less than our operating income or
loss would indicate. In general, merchant payable balances have increased in line with the growth of our overall business, which has created additional cash flow from operations. Furthermore, growth
in our international operations has accelerated cash flow due to more favorable payment terms with our merchants. The redemption model generally improves our overall cash flow because we do not pay
our merchants until the customer redeems the Groupon. To the extent we offer our merchants more favorable or accelerated payment terms or our gross billings do not continue to grow in the future, our
cash flow could be adversely impacted.

For the nine months ended September 30, 2011, our net cash provided by operating activities of $129.5 million consisted of net loss of $238.1 million, offset by
$83.2 million in adjustments for non-cash items and $284.4 million in cash provided by changes in working capital and other activities. Adjustments for non-cash
items primarily consisted of $60.9 million in stock-based compensation expense, $8.7 million in depreciation expense on property and equipment, $14.1 million in amortization of
intangible assets and $20.0 million in losses in equity interests, partially offset by an acquisition-related benefit of $4.8 million, excess tax benefit on stock-based compensation of
$11.3 million and the gain realized on the redemption of common shares of $4.9 million. The increase in cash resulting from changes in working capital activities primarily consisted of a
$314.8 million increase in our merchant payable, due to the growth in the number of Groupons sold, and a $109.0 million increase in accrued expenses and other current liabilities
primarily related to online marketing costs incurred to acquire subscribers and operating expenses such as payroll and benefits, customer refunds and costs associated with subscriber loyalty and
reward programs. These increases were partially offset by a decrease in operating cash flow due to a $21.9 million decrease in

accounts payable, due to the timing of invoices received and paid, a $69.7 million increase in accounts receivable, and a $41.0 million increase in prepaid expenses and other current
assets primarily related to security deposits we paid to our credit card processors. Our accounts receivable at September 30, 2011 primarily relate to amounts due from credit card processors.
The increase in accounts receivable and prepaid and other current assets for the nine months ended September 30, 2011 was attributable to the increase in gross billings and the timing of
receipt of cash from the credit card processors. As of September 30, 2011, the accounts receivable related to our International segment represented 86% of total accounts receivable. Increases
in accrued expenses, prepaid expenses and other current assets primarily reflect the significant increase in the number of employees, vendors, and subscribers resulting from our internal growth and
global expansion through recent acquisitions.

For
the nine months ended September 30, 2010, our net cash provided by operating activities of $35.0 million consisted of net loss of $77.8 million, offset by
$49.0 million in adjustments for non-cash items and $63.8 million in cash provided by changes in working capital and other activities. Adjustments for non-cash items primarily consisted
of $37.8 million in acquisition-related costs, $8.7 million in stock-based compensation and $6.9 million in depreciation and amortization, offset by $4.6 million in
deferred income taxes. The increase in cash resulting from changes in working capital primarily consisted of a $47.5 million increase in accrued merchant payable due to an increase in the
number of Groupons sold, a $12.2 million increase in accounts payable due to timing of invoices received and paid, an increase of $23.7 million in accrued expense and other current
liabilities, and a decrease of $1.9 million in prepaid expenses and other current assets. These increases were partially offset by a decrease in operating cash flow due to an increase in
accounts receivable of $16.1 million and an increase in net other assets and liabilities of $6.1 million. The increases in accounts receivable, accounts payable, accrued expenses and
other current liabilities are a result of internal business growth.

For the year ended December 31, 2010, our net cash provided by operating activities of $86.9 million consisted of a net loss of $413.4 million, offset by
$245.1 million in adjustments for non-cash items and $255.2 million in cash provided by changes in working capital and other activities. Adjustments for non-cash
items primarily consisted of $203.2 million in acquisition-related expenses, $36.2 million in stock-based compensation expense, $1.9 million in depreciation expense on property
and equipment and $11.0 million in amortization of intangible assets,
partially offset by $7.3 million in deferred income taxes. The increase in cash resulting from changes in working capital activities primarily consisted of a $149.0 million increase in
our merchant payable, due to the growth in the number of Groupons sold, a $94.6 million increase in accrued expenses and other current liabilities primarily related to online marketing costs
incurred to acquire subscribers and operational expenses such as payroll and benefits, customer refunds and costs associated with subscriber loyalty and reward programs, and a $50.8 million
increase in accounts payable. These increases were partially offset by a decrease in operating cash flow due to a $34.9 million increase in accounts receivable, a $2.5 million increase
in prepaid expenses and other current assets and a $1.5 million increase in other assets and liabilities. Our accounts receivable at December 31, 2010 primarily relate to amounts due
from credit card processors. The increase in accounts receivable at December 31, 2010 was attributable to the increase in gross billings and the timing of receipt of cash from the credit card
processors. As of December 31, 2010, the accounts receivable related to our International segment represented 88% of total accounts receivable. Increases in accrued expenses, accounts payable,
accounts receivable and other current assets primarily reflect the significant increase in the number of employees, vendors, and subscribers resulting from our internal growth and global expansion
through recent acquisitions.

For
the year ended December 31, 2009, our net cash provided by operating activities of $7.5 million consisted of a net loss of $1.3 million, offset by
$8.8 million in cash provided by working capital and other items. The increase in cash resulting from changes in working capital primarily consisted of a $4.3 million increase in accrued
merchant payable and accrued expenses resulting from internal business growth.

For
the year ended December 31, 2008, our net cash used in operating activities of $1.5 million primarily reflected our net loss of $1.5 million.

Cash used in investing activities primarily consists of capital expenditures, acquisitions of businesses and changes in the balances of
restricted stock.

For the nine months ended September 30, 2011, our net cash used in investing activities of $120.7 million primarily consisted of $55.1 million invested in
subsidiaries and equity interests, $29.8 million in capital expenditures, $15.1 million in purchases of intangible assets and $12.6 million in net cash paid in business
acquisitions. Intangible assets purchased in the period relate primarily to domain names.

For
the nine months ended September 30, 2010, our net cash used in investing activities of less than $0.1 million primarily consisted of $6.5 million in cash
received from acquisitions, partially offset by $6.1 million in capital expenditures.

For
the year ended December 31, 2010, our net cash used in investing activities of $11.9 million was primarily comprised of $14.7 million in capital expenditures,
partially offset by $3.8 million in net cash received from acquisitions. The capital expenditures reflect the significant growth of the business domestically and internationally. We received
net cash from our acquisitions in 2010, as a significant portion of the purchase price paid consisted of stock and contingent consideration.

For
the year ended December 31, 2009, our net cash used in investing activities of $2.0 million primarily reflected a $1.4 million change in restricted cash related
to cash paid for a security agreement with our merchant processor and a letter of credit for a facility lease agreement.

Cash Provided By Financing Activities

Cash provided by financing activities primarily consists of net proceeds from the issuance of common and preferred stock and the
exercise of stock options by employees, net of the repurchase of founders' stock, common stock and preferred stock held by certain stockholders.

For
the nine months ended September 30, 2011, our net cash provided by financing activities of $120.3 million was driven primarily by net cash proceeds from the issuance of
common and preferred stock of $509.7 million. We used $353.5 million of the proceeds to repurchase our common stock, $35.2 million to redeem shares of our preferred stock and
$13.6 million to pay our related party loans incurred in connection with the CityDeal acquisition.

For
the nine months ended September 30, 2010, our net cash provided by financing activities of $20.1 million was driven primarily by net cash proceeds from the issuance of
common and preferred stock of $134.9 million. We used $119.9 million of the proceeds to repurchase our common stock.

For
the year ended December 31, 2010, our net cash provided by financing activities of $30.4 million was driven primarily by net cash proceeds from the issuance of
preferred stock of $584.7 million. We used $503.2 million of the proceeds to repurchase our common stock, $55.0 million to redeem shares of our preferred stock, and
$1.3 million to pay dividends to our preferred stockholders. In addition, we received $5.0 million from related party loans throughout 2010.

For
the year ended December 31, 2009, our net cash provided by financing activities of $3.8 million was due primarily to $29.9 million of net cash proceeds from the
sale and issuance of preferred stock, of which $26.4 million was used to fund a special dividend to certain holders of our capital stock.

For
the year ended December 31, 2008, our net cash provided by financing activities of $4.4 million reflected $4.7 million in net proceeds from the sale and issuance
of preferred stock.

The following table summarizes our future contractual obligations and commitments as of September 30, 2011:

Payments due by period

Total

2011

2012

2013

2014

2015

Thereafter

(in thousands)

Operating lease obligations(1)

$

90,763

$

5,534

$

18,012

$

15,168

$

13,045

$

12,443

$

26,561

Purchase obligations(2)

23,952

5,010

9,853

9,089







Contingent consideration(3)

12,962

4,335

4,188

4,439







Total

$

127,677

$

14,879

$

32,053

$

28,696

$

13,045

$

12,443

$

26,561

(1)

The
operating lease obligations are for office facilities and are non-cancelable. Certain leases contain periodic rent escalation adjustments
and renewal and expansion options. Operating lease obligations expire at various dates with the latest maturity in 2017.

Contingent
consideration represents the obligation to transfer contingent payment consideration to former owners of certain entities we acquired if
specified operating objectives and financial results are achieved by such entities during the next three years.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2011.

Quantitative and Qualitative Disclosures about Market Risk

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our
business, including the effect of foreign currency fluctuations, interest rate changes and inflation. Information relating to quantitative and qualitative disclosures about these market risks is set
forth below.

Foreign Currency Exchange Risk

We transact business in various foreign currencies other than the U.S. dollar, principally the euro, British pound sterling and
Japanese yen, which exposes us to foreign currency risk. For the nine months ended September 30, 2011, we derived approximately 59.3% of our revenue from international customers and we expect
the percentage of revenue derived from outside the United States to increase in future periods as we continue to expand globally. Revenue and related expenses generated from our international
operations are denominated in the functional currencies of the corresponding country. The functional currency of our subsidiaries that either operate or support these markets is generally the same as
the corresponding local currency. The results of operations of, and certain of our intercompany balances associated with, our international operations are exposed to foreign exchange rate
fluctuations. Upon consolidation, as exchange rates vary, our revenue and other operating results may differ materially from expectations, and we may record significant gains or losses on the
remeasurement of intercompany balances.

We
assess our market risk based on changes in foreign currency exchange rates utilizing a sensitivity analysis that measures the potential impact in earnings, fair values and cash flows
based on a hypothetical 10% change (increase and decrease) in currency rates. We use a current market pricing model to assess the changes in the value of the U.S. dollar on foreign currency
denominated monetary
assets and liabilities. The primary assumption used in these models is a hypothetical 10% weakening or strengthening of the U.S. dollar against all our currency exposures as of September 30,
2011.

We
used September 30, 2011 market rates on outstanding foreign currency denominated monetary assets and liabilities to perform the sensitivity analyses separately for each of our
currency exposures. The

estimates
are based on the market risk sensitive portfolios described in the preceding paragraphs and assume instantaneous, parallel shifts in exchange rates. As of September 30, 2011,
our working capital deficit (defined as current assets less current liabilities) subject to foreign currency translation risk was $271.7 million. The potential decrease in net current assets
from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be $27.2 million.

Interest Rate Risk

Our cash and cash equivalents primarily consisted of highly-rated commercial paper and money market funds. We currently have no
investments of any type and do not have any long-term borrowings. Our exposure to market risk for changes in interest rates is limited because nearly all of our cash and cash equivalents
have a short-term maturity and are used primarily for working capital purposes.

Impact of Inflation

We believe that our results of operations are not materially impacted by moderate changes in the inflation rate. Inflation and changing
prices did not have a material effect on our business, financial condition or results of operations in 2008, 2009, 2010 or the nine months ended September 30, 2011.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States, or
U.S. GAAP, requires estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenues and expenses, and the related disclosures of contingent
liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the
company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. Based on this definition, we have identified the following critical accounting policies and estimates addressed below. We also have other key accounting policies, which
involve the use of estimates, judgments, and assumptions that are significant to understanding our results. See Note 3 "Summary of Significant Accounting
Policies" of Notes to Consolidated Financial Statements and Note 2 "Summary of Significant Accounting Policies" of Notes
to the Condensed Consolidated Financial Statements for further information. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information available
at the time. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Revenue Recognition

We recognize revenue from Groupons when the following criteria are met: persuasive evidence of an arrangement exists; delivery has
occurred; the selling price is fixed or determinable; and collectability is reasonably assured. These criteria are met when the number of customers who purchase the daily deal exceeds the
predetermined threshold, the Groupon has been electronically delivered to the purchaser and a listing of Groupons sold has been made available to the merchant. At that time, our obligations to the
merchant, for which we are serving as an agent, are substantially complete. Our remaining obligations, which are limited to remitting payment to the merchant and continuing to make available on our
website the listing of Groupons previously provided to the merchant, are inconsequential or perfunctory. We record as revenue the net amount we retain from the sale of Groupons after paying an agreed
upon percentage of the purchase price to the featured merchant excluding any applicable taxes. Revenue is recorded on a net basis because we are acting as an agent of the merchant in the transaction.

Subscriber Loyalty and Reward Programs

We use various subscriber loyalty and reward programs to build brand loyalty, generate traffic to the website and provide subscribers
with incentives to buy Groupons. When subscribers perform qualifying

acts,
such as providing a referral to a new subscriber or participating in promotional offers, we grant the customer credits that can be redeemed for awards such as free or discounted goods or
services in the future. We accrue the costs related to the associated obligation to redeem the award credits granted at issuance in accrued expenses on the consolidated balance sheets and record the
expense within marketing expense in the consolidated statements of operations. If our judgments regarding estimated accrued costs associated with subscriber loyalty and reward programs are inaccurate,
reported results of operations could differ from the amount we previously accrued.

Refunds

At the time revenue is recorded, we record an allowance for estimated customer refunds primarily based on historical experience. We
accrue costs associated with refunds in accrued expenses on the consolidated balance sheets. The cost of refunds where the amount payable to the merchant is recoverable is recorded in the consolidated
statements of operations as a reduction to revenue. The cost of refunds under the Groupon Promise, when there is no amount recoverable from the merchant, are presented as a cost of revenue. To the
extent the refund is provided to a subscriber, we record the expense within selling general and administrative expense in the consolidated statements of operations. If our judgments regarding
estimated customer refunds are inaccurate, reported results of operations could differ from the amount we previously accrued.

Acquisitions and the Recoverability of Goodwill and Long-Lived Intangible Assets

A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for
business combinations using the purchase method of accounting and allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon
their estimated fair value at the
purchase date. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

In
determining the fair value of assets acquired and liabilities assumed in a business combination, we primarily use recognized valuation methods such as an income approach or a cost
approach and apply present value modeling. Our significant estimates in the income or cost approach include identifying business factors such as size, growth, profitability, risk and return on
investment and assessing comparable revenue and operating income multiples in estimating the fair value. Further, we make certain assumptions within present value modeling valuation techniques
including risk-adjusted discount rates, future price levels, rates of increase in operating expenses, weighted average cost of capital, rates of long-term growth, and effective
income tax rates. Valuations are performed by management or independent valuation specialists under management's supervision, where appropriate. We believe that the estimated fair value assigned to
the assets acquired and liabilities assumed are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could
differ from those estimates.

Future
changes in our assumptions or the interrelationship of those assumptions may negatively impact future valuations. In future measurements of fair value, adverse changes in
discounted cash flow assumptions could result in an impairment of goodwill or intangible assets that would require a non-cash charge to the consolidated statements of operations and may
have a material effect on our financial condition and operating results.

Stock-Based Compensation

We measure stock-based compensation cost at fair value, net of estimated forfeitures, and generally recognize the corresponding
compensation expense on a straight-line basis over the service period during which awards are expected to vest. We include stock-based compensation expense in selling, general and
administrative expenses in our consolidated statements of operations. The fair value of restricted stock and restricted stock units is based on the valuation of our common stock on the date of grant.
Determining the fair value of stock-based awards at the grant date requires judgment.

We
use the Black-Scholes-Merton option-pricing model to determine the fair value of stock options. The determination of the grant date fair value of options using an option-pricing model
is affected by
our estimated common stock fair value as well as assumptions regarding a number of other complex and subjective variables. These variables include the fair value of our common stock, our expected
stock price volatility over the expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates, and expected dividends, which are estimated as
follows:



Fair Value of Our Common Stock. Because our stock has not
been publicly traded, we must estimate the fair value of common stock, as discussed in "Common Stock Valuations" below.



Expected Term. The expected term represents the period of
time the stock options are expected to be outstanding and is based on the "simplified method" allowed under SEC guidance. We used the "simplified method" due to the lack of sufficient historical
exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options.



Volatility. Since we do not have a trading history for our
common stock, the expected stock price volatility was estimated by taking the average historic price volatility for publicly-traded options of comparable industry peers similar in size, stage of life
cycle and financial leverage, based on daily price observations over a period equivalent to the expected term of the stock option grants. We did not rely on implied volatilities of traded options in
our industry peers' common stock because the volume of activity was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a
sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no
longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.



Risk-free Interest Rate. The
risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.



Dividend Yield. We do not presently plan to pay cash
dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

If
any of the assumptions used in the Black-Scholes-Merton model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted
previously.

The
following table presents the weighted-average assumptions used to estimate the fair value of options granted during the years ended December 31, 2008, 2009, 2010 and the nine
months ended September 30, 2011:

Year Ended December 31,

Nine Months Ended
September 30, 2011

2008

2009

2010

Dividend yield









Risk-free interest rate

3.10

%

2.82

%

2.58

%

1.79

%

Expected term (in years)

5.98

6.84

6.13

4.47

Expected volatility

46

%

46

%

46

%

44

%

Common Stock Valuations

The fair value of the common stock underlying our stock options was determined by our board of directors, or the Board, which intended
that all options granted were exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant. The assumptions we use in the
valuation model are based on future expectations combined with management judgment. In the absence of a public trading market, the Board with input from management exercised significant judgment and
considered numerous objective and subjective factors to determine the fair value of our common stock as of the date of each option grant, including the following factors:



the prices, rights, preferences and privileges of our preferred stock relative to the common stock;

the prices of our preferred stock sold to outside investors in arms-length transactions;



our operating and financial performance;



current business conditions and projections;



the hiring of key personnel;



the history of our company and the introduction of new products and services;



our stage of development;



the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an
initial public offering or sale of our company, given prevailing market conditions;



any adjustment necessary to recognize a lack of marketability for our common stock;



the market performance of comparable publicly-traded companies; and



the U.S. and global capital market conditions.

We
granted stock options with the following exercise price ranges each quarter since the beginning of 2008. We have not granted any stock options subsequent to June 30, 2011.

Three Months Ended

Shares Underlying
Options

Weighted Average
Exercise Price
($)

March 31, 2008





June 30, 2008

60,000

0.015

September 30, 2008

960,000

0.015

December 31, 2008

1,200,000

0.015

March 31, 2009

600,000

0.025

June 30, 2009

5,628,000

0.045

September 30, 2009

6,516,000

0.080

December 31, 2009

1,746,000

0.255

March 31, 2010

11,250,000

1.210

June 30, 2010

2,242,800

1.675

September 30, 2010

3,736,400

2.245

December 31, 2010

301,200

3.475

March 31, 2011

120,000

7.900

June 30, 2011(1)

38,000

0.015

(1)

The
38,000 options granted in the three months ended June 30, 2011 have an exercise price of $0.015 because they were granted as part of a
settlement agreement with a former employee. The exercise price of these options represents the fair market value of the stock when the employee left the Company.

Summarized below are the significant factors the Board considered in determining the fair value of the common stock underlying our stock-based
awards.

Fiscal Year 2008 and Prior

We raised $4.7 million in net proceeds from the issuance convertible preferred stock in January 2008 and began operations
with the launch of our first market in Chicago in October 2008.

Fiscal Year 2009

First Quarter 2009. In the first quarter, we generated revenue of less than $0.1 million in the Chicago market.

Second Quarter 2009. In the second quarter, we launched our services in four additional markets (New York, Washington D.C.,
San Francisco and Boston) and the total number of subscribers rose

to
approximately 0.2 million at June 30, 2009. We generated revenue of $1.2 million for the second quarter of 2009.

Third Quarter 2009. In the third quarter, we launched our services in 12 new markets across the United States and the total number of
subscribers increased to approximately 0.6 million at September 30, 2009. We generated revenue of $4.0 million for the third quarter of 2009.

Fourth Quarter 2009. In the fourth quarter, we raised $29.9 million in net proceeds from the issuance of convertible preferred stock
in November 2009 and the total number of subscribers increased to approximately 1.8 million at December 31, 2009 as we launched our services in 13 additional markets across the
United States. We generated revenue of $9.3 million for the fourth quarter of 2009.

Fiscal Year 2010

First Quarter 2010. In the first quarter, the total number of subscribers increased to approximately 3.4 million as of
March 31, 2010 as we launched our services in 13 new markets across the United States. In addition, we launched our official Groupon application for the Apple iPhone and iPod touch, which
provides at no additional cost a more convenient buying and redemption process for both consumers and merchants. We generated revenue of $20.3 million for the first quarter of 2010.

Second Quarter 2010. In the second quarter, we raised $134.9 million in net proceeds from the issuance of convertible preferred
stock in April 2010. We also expanded our global presence to 80 markets and 16 countries in Europe and in Latin America with acquisitions. In addition, we acquired a mobile
development company in May 2010. We also launched our services in 20 additional markets across North America, including Toronto and Vancouver, increasing the total number of subscribers to
approximately 10.4 million as of June 30, 2010. We generated revenue of $38.7 million for the second quarter of 2010.

Third Quarter 2010. In the third quarter, the total number of subscribers increased to approximately 21.4 million as of
September 30, 2010 as we launched our services in 22 new markets across North America, including Calgary, Edmonton and Ottawa. We also expanded our global presence into the Russian Federation
and Japan in August 2010. In addition, we began targeting deals to subscribers based upon their personal preferences and buying history. We generated revenue of $81.8 million for the
third quarter of 2010.

Fourth Quarter 2010. In the fourth quarter, we raised $449.7 million in net proceeds from the issuance of preferred stock in
December 2010. In addition, we expanded our presence in the Asia-Pacific region, and we also acquired Ludic Labs, Inc., a company that designs and develops local marketing services,
in November 2010. The total number of subscribers increased to approximately 50.6 million as of December 31, 2010 as we launched our services in 69 additional markets across North
America, including 12 markets in Canada. We generated revenue of $172.2 million for the fourth quarter of 2010.

Fiscal Year 2011

First Quarter 2011. In the first quarter of 2011 we raised $492.5 million in net proceeds from the issuance of preferred stock. We
expanded our presence into new and growing markets in India, Malaysia, South Africa and the Middle East through a series of acquisitions. The total number of subscribers increased to approximately
83.1 million as of March 31, 2011 as we launched our services in 21 additional markets across North America. We generated revenue of $295.5 million for the first quarter of 2011.

Second Quarter 2011. In the second quarter of 2011 we expanded our presence into Indonesia. The total number of subscribers increased to
approximately 115.7 million as of June 30, 2011. We generated revenue of $392.6 million for the second quarter of 2011.

Third Quarter 2011. In the third quarter of 2011, the following significant events occurred: (1) our number of subscribers increased
to approximately 142.9 million as of September 30, 2011; (2) we acquired two technology companies to improve our in-house technological capabilities; and (3) we
launched Groupon Goods.

Income Taxes

We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our
tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is
uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in
countries where we have higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant
tax, accounting and other laws, regulations, principles and interpretations.

We
are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable, the final
determination of any tax audits and any related litigation could be materially different from historical income tax provisions and accruals. The results of an audit or litigation could have a material
effect on our operating results or cash flows in the period or periods for which that determination is made.

We
account for income taxes using the liability method, under which deferred income tax assets and liabilities are recognized based upon anticipated future tax consequences attributable
to differences between financial statement carrying values of assets and liabilities and their respective tax bases. We regularly review deferred tax assets to assess their potential realization and
establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Any change
in the valuation allowance would be charged to income in the period such determination was made.

We
began foreign operations in 2010 and generated taxable losses in our foreign jurisdictions. Since we have no prior history of capturing our future income projections by jurisdiction,
we record a full valuation allowance in all foreign jurisdictions in a net deferred tax asset position at December 31, 2010. Our unrecoverable foreign net operating loss carryforwards are
primarily in Europe and Asia. We will continue to reassess the need for a valuation allowance on our foreign deferred tax assets on a quarterly basis.

In
performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of reversals of existing temporary differences and the
implementation of tax planning strategies. A change in these assumptions could cause an increase or decrease to the valuation allowance resulting in an increase or decrease in our effective tax rate,
which could materially impact our results of operations.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board, or the FASB, issued accounting guidance, which, among other
requirements, defines fair value, establishes a framework for measuring fair value, and expands disclosures about the use of fair value measurements. Such guidance prescribes a single definition of
fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For financial instruments
and certain nonfinancial assets and liabilities that are recognized or disclosed at fair value on a recurring basis at least annually, the guidance was effective beginning the first fiscal year that
begins after November 15, 2007. This portion of the guidance, which was adopted as of the beginning of 2008, had no impact on our consolidated financial statements. For all other nonfinancial
assets and liabilities the guidance was effective for fiscal years beginning after November 15, 2008. We adopted this guidance effective as of the

beginning
of 2009, and its application had no impact on our consolidated financial statements. In January 2010, the FASB issued additional guidance that improves disclosures about fair value
measures that were originally required. The new guidance is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales,
issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for
interim periods within those years. The adoption of this guidance did not impact our financial position or results of operations.

In
December 2007, the FASB issued guidance that establishes principles and requirements for determining how a company recognizes and measures the fair value of identifiable assets
acquired, liabilities assumed, noncontrolling interests and certain contingent considerations acquired in a business combination. The guidance on business combinations also requires
acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized. This guidance became
effective for fiscal years beginning after December 15, 2008 and we adopted the provisions of this guidance prospectively beginning in 2009. In December 2010, the FASB issued an update
to this guidance, which specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business
combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. The amendments also expand the supplemental pro forma disclosures
that are required. The new guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2010. We adopted the provisions of this business combinations guidance at the beginning of 2011.

In
April 2008, the FASB issued a staff position that amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful
life of recognized intangible assets. This new guidance applies to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions.
Under this guidance, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of
historical experience, must consider assumptions that market participants would use about renewal or extension. This staff position became effective for fiscal years beginning after
December 15, 2008. We adopted the provisions of this guidance prospectively beginning in 2009, and its application had no impact on our consolidated financial statements.

In
June 2009, the FASB issued guidance that establishes the FASB Accounting Standards Codification as the sole source of authoritative U.S. GAAP. Pursuant to these provisions, we
have incorporated the applicable references in its consolidated financial statements. The adoption of this guidance did not impact our financial position or results of operations.

In
June 2009, the FASB issued guidance that eliminates the qualifying special purpose entity concept, changes the requirements for derecognizing financial assets and requires enhanced
disclosures about transfers of financial assets. The guidance also revises earlier guidance for determining whether an entity is a variable interest entity, requires a new approach for determining who
should consolidate a variable interest entity, changes when it is necessary to reassess who should consolidate a variable interest entity, and requires enhanced disclosures related to an enterprise's
involvement in variable interest entities. The guidance is effective for the first annual reporting period that begins after November 15, 2009. We adopted the provisions of this guidance
prospectively beginning in 2010, and its application had no impact on our consolidated financial statements.

In
September 2009, the FASB issued guidance that allows companies to allocate arrangement consideration in a multiple element arrangement in a way that better reflects the transaction
economics. It provides another alternative for establishing fair value for a deliverable when vendor specific objective evidence or third-party evidence for deliverables in an arrangement cannot be
determined. When this evidence cannot be determined, companies will be required to develop a best estimate of the selling price

to
separate deliverables and allocate arrangement consideration using the relative selling price method. The guidance also expands the disclosure requirements to require that an entity provide both
qualitative and quantitative information about the significant judgments made in applying this guidance. This guidance was effective on a prospective basis for revenue arrangements entered into or
materially modified on or after January 1, 2011. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In
January 2010, the FASB issued additional guidance that improves disclosures for certain fair value measures that were originally required. The new guidance is effective for interim
and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of this guidance did not impact our
financial position or results of operations.

In
February 2010, the FASB issued guidance, effective immediately that removes the requirement to disclose the date through which subsequent events were evaluated in both originally
issued and reissued financial statements for SEC filers. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In
December 2010, the FASB issued guidance about when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. According to
the new guidance, entities must consider whether it is more likely than not that goodwill impairment exists by assessing if there are any adverse qualitative factors indicating impairment. The
qualitative factors are consistent with the existing guidance. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The
adoption of this new guidance did not have a material impact on our consolidated financial statements.

In
December 2010, the FASB issued guidance about the disclosure of supplementary pro forma information for business combinations, which clarifies the disclosure requirements for pro
forma financial information related to a material business combination or a series of immaterial business combinations that are material in the aggregate. The guidance clarified that the pro forma
disclosures are prepared assuming the business combination occurred at the start of the prior annual reporting period. Additionally, a narrative description of the nature and amount of material,
non-recurring pro forma adjustments would be required. The new guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2010. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In
May 2011, the FASB issued guidance that changed the requirement for presenting "Comprehensive Income" in the consolidated financial statements. The update requires an entity to
present the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The update is effective for fiscal
years, and interim periods within those years, beginning after December 15, 2011 and should be applied retrospectively. The adoption of the standard will not have a material impact on our
financial position or results of operations.

In
May 2011, the FASB issued guidance that amends certain fair value measurement principles and disclosure requirements. The new guidance states, among other things, that the concepts of
highest and best use and valuation premise are only relevant when measuring the fair value of nonfinancial assets and prohibits the grouping of financial instruments for purposes of determining their
fair values when the unit of account is specified in other guidance. The update is to be applied prospectively and is effective during interim and annual periods beginning after December 15,
2011. The adoption of this guidance will not have a material impact on our financial position or results of operations.

Groupon is a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a
discount. Traditionally, local merchants have tried to reach consumers and generate sales through a variety of methods, including the yellow pages, direct mail, newspaper, radio, television and online
advertisements, promotions and the occasional guy dancing on a street corner in a gorilla suit. By bringing the brick and mortar world of local commerce onto the internet, Groupon is creating a new
way for local merchants to attract customers and sell goods and services. We provide consumers with savings and help them discover what to do, eat, see and buy in the places where they live and work.

We
started Groupon in October 2008 and believe the growth of our business demonstrates the power of our solution and the size of our market opportunity:



We increased our revenue from $1.2 million in the second quarter of 2009 to $430.2 million in the third
quarter of 2011. We generated these revenues from gross billings of $3.3 million for the second quarter of 2009 as compared to gross billings of $1,157.2 million for the third quarter of
2011. We had net income of $21,000 for the second quarter of 2009 as compared to a net loss of $10.6 million for the third quarter of 2011.



We expanded from five North American markets as of June 30, 2009 to 175 North American markets and
45 countries as of September 30, 2011. Revenue from our international and North American operations was $268.7 million and $161.5 million, respectively, in the third
quarter of 2011.



We increased our subscriber base from 152,203 as of June 30, 2009 to 142.9 million as of
September 30, 2011. A total of 43,014 customers purchased Groupons through the end of the second quarter of 2009 as compared to 29.5 million through the end of the third quarter
of 2011, including 16.0 million customers that have purchased more than one Groupon since January 1, 2009.



We increased the number of merchants featured in our marketplace from 212 in the second quarter of 2009 to 78,649 in the
third quarter of 2011.



We sold 116,231 Groupons in the second quarter of 2009 compared to 33.0 million Groupons in the third
quarter of 2011.



We grew from 37 employees as of June 30, 2009 to 10,418 employees as of September 30, 2011.

Each
day we email our subscribers discounted offers for goods and services that are targeted by location and personal preferences. Consumers also access our deals directly through our
websites and
mobile applications. A typical deal might offer a $20 Groupon that can be redeemed for $40 in value at a restaurant, spa, yoga studio, car wash or other local merchant. Customers purchase Groupons
from us and redeem them with our merchants. Our revenue is the purchase price paid by the customer for the Groupon less an agreed upon percentage of the purchase price paid to the featured merchant.
Our gross billings represent the gross amounts collected from customers for Groupons sold, and we consider this metric to be an indication of our growth and business performance as it measures the
volume of transactions through our marketplace. Gross billings are not equivalent to revenues or any other metric presented in our consolidated financial statements.

Groupon
primarily addresses the worldwide local commerce markets in the leisure, recreation, foodservice and retail sectors. The leisure, recreation and foodservice market is expected to
be $1.4 trillion in the U.S. and $5.3 trillion worldwide in 2011 (Euromonitor International 2011 report). The retail market is expected to be $2.9 trillion in the U.S. and
$12.2 trillion worldwide in 2011. We believe a substantial portion of these expenditures on leisure, recreation, foodservice and retail will be spent with local merchants. This belief is based
on the collective experience of our management and employees that commerce involving individuals is primarily local and has been substantiated by the growth we have

experienced
since our inception. Groupon also addresses the online advertising market serving these merchants. The size of the U.S. online advertising market is estimated to be $51.9 billion in
2011, of which $16.1 billion is estimated to be spent by local merchants according to Borrell Associates. The size of the global online advertising market is estimated to be approximately
$79 billion in 2011 (IDC May 2011 Worldwide New Media Market Model, 2H10).

Our Business

The following examples illustrate how our marketplace works and the benefits it can provide our merchants and consumers.

Merchant Objective: Star Fleet Entertainment Yachts, a yacht charter business on the Texas Gulf Coast, hosts murder mystery themed and
romantic dinner cruises for up to 150 passengers. Star Fleet regularly sold out its murder mystery themed cruises, but had trouble filling its romantic dinner cruises. The President and Chief
Executive Officer of Star Fleet sought to use our service as a marketing tool to introduce Star Fleet to new consumers and increase sales.

The Deal: On January 19, 2010, we emailed and posted the following Groupon daily deal in Houston, Texas that offered one ticket on a
two-hour romantic dinner cruise on the Star Fleet Entertainment Yacht for $32, a 50% discount.

The Results: We sold 2,181 Groupons in 24 hours. By targeting an under-performing segment of its business, Star Fleet was
able to increase ticket sales for romantic dinner cruises. In addition, more than half of the Groupons were sold to new customers. Star Fleet's website traffic peaked on the day the deal was offered
at approximately 6,700 unique visits, 82% of which were from new visitors.

Star
Fleet sold out all romantic dinner cruises from January 19, 2010 through September 30, 2010 and substantially increased its gross sales for romantic dinner cruises compared to the
same period in the prior year.



Latin Cuisine and Drinks at Seviche, Louisville, Kentucky

Merchant Objective: Seviche is an award-winning restaurant located in Louisville, Kentucky. Despite Seviche's award-winning status, it
struggled during the winter months to maintain sales even after trying several forms of traditional local marketing.

The Deal: On February 8, 2010, we emailed and posted the following Groupon daily deal in Louisville, Kentucky that offered $60 worth
of Latin cuisine and drinks for $25, a 58% discount.

The Results: We sold 793 Groupons in 24 hours. Seviche's customer headcount increased by 170% in the week following the daily
deal. The Groupon customers spent an average 68% above the $60 face value of the Groupon, generating approximately $80,000 in gross sales.

We
have offered deals involving over 190 different types of businesses, services and activities that fall into the six broad categories identified below. The following chart shows the
percentage of deals we offered across these categories during the nine months ended September 30, 2011 in our North America and International segments:

North America

International

Our Advantage

We have created an e-commerce marketplace for connecting local merchants to consumers. Although there are many companies
which have tried to replicate our approach, we believe that the customer experience and relevancy of our deals, our merchant scale and quality and our brand are sustainable competitive advantages.

Customer Experience and Relevance of Deals. We are committed to providing a great customer experience and maintaining the trust of our
customers.
Consistent with this commitment, our "Groupon Promise" is core to our customer service philosophy:

"Nothing is more important to us than treating our customers well. If you ever feel like Groupon let you down, give us a call and we'll return your purchasesimple
as that."

In
addition, we use our technology and scale to target relevant deals based on individual subscriber preferences. As we increase the volume of transactions through our marketplace, we
increase the amount of data that we have about deal performance and customer interests. This data allows us to continue to improve our ability to help merchants design the most effective deals and
deliver deals to customers that better match their interests. We use information about our subscribers to select and send deals via email and our mobile applications can also target deals to
subscribers based on proximity to the sponsoring merchant. Increased relevancy enables us to offer several daily deals, which we believe results in increasing purchases by targeted subscribers,
thereby driving greater demand for Groupons. We monitor the relevancy of deals by measuring purchasing rates among targeted subscribers.

Merchant Scale and Quality. In the nine months ended September 30, 2011, we featured deals from over 190,000 merchants
worldwide across
over 190 categories of goods and services. Our salesforce of over 4,800 sales representatives enables us to work with local merchants in 175 North American markets and 45 countries. We
draw on the experience we have gained to evaluate prospective merchants based on quality, location and relevance to our subscribers. We maintain a large base of prospective merchants interested in our
marketplace, which enables us to be more selective and offer our subscribers higher quality deals. Increasing our merchant base also increases the number and variety of deals that we offer to

Brand. We believe we have built a trusted and recognizable brand by delivering a compelling value proposition to merchants and
consumers. A benefit
of our brand is that a substantial portion of our subscribers are acquired through word-of-mouth, which we consider sources other than from a paid-for link to our website. For
example, during the nine months ended September 30, 2011, approximately 40% of our subscribers in our North America segment were acquired through word-of-mouth. We believe our brand is trusted
due to our dedication to our customers and our significant investment in customer satisfaction. We believe that trust in our brand is evidenced by our repeat customers and the scale of our merchant
pool.

Our Strategy

Our objective is to become an essential part of everyday local commerce for consumers and merchants. Key elements of our strategy
include the following:

Grow our subscriber base. As of September 30, 2011, we had 142.9 million subscribers. We have made significant investments to
acquire
subscribers through online marketing initiatives, such as search engine marketing, display advertisements, referral programs and affiliate marketing. In 2010 and during the nine months ended
September 30, 2011, we spent $241.5 million and $466.5 million, respectively, on these initiatives. In addition, our subscriber base has increased by
word-of-mouth. We intend to continue to invest in acquiring subscribers so long as we believe the economics of our business support such investments. See
"Subscriber Economics." Our goal is to retain existing and acquire new subscribers by providing more targeted and real-time deals, delivering high quality customer service and
expanding the number and categories of deals we offer. We intend to continue to invest in the development of increased relevance of our service as the number and variety of our deals we offer our
subscribers increase and we gain more information about our subscribers' interests.

Grow the number of merchants we feature. During 2010, we featured over 66,000 Groupon daily deals for merchants and in the nine months
ended
September 30, 2011, we featured Groupon daily deals for over 190,000 merchants worldwide. To drive merchant growth, we have expanded the number of ways in which consumers can discover
deals through our marketplace. We adjust the number and variety of products we offer merchants based on merchant demand in each market. We have also made significant investments in our salesforce,
which builds merchant relationships and local expertise. Our merchant retention efforts are focused on providing merchants with a positive experience by offering targeted placement of their deals to
our subscriber base, high quality customer service and tools to manage deals more effectively. For example, we recently began offering a mobile redemption application that enables our merchants to
manage their Groupon business and maintain an ongoing relationship with their Groupon customers. We routinely solicit feedback from our merchants to ensure their objectives are met and they are
satisfied with our services. Based on this feedback, we believe our merchants consider the profitability of the immediate deal, potential revenue generated by repeat customers and increased brand
awareness for the merchant and the resulting revenue stream that brand awareness may generate over time. Some merchants view our deals as a marketing expense and may be willing to offer deals with
little or no immediate profitability in an effort to gain future customers and increased brand awareness.

Increase the number and variety of our products through innovation. We have launched a variety of new products in the past
12 months and we
plan to continue to launch new products to increase the number of subscribers and merchants that transact business through our marketplace. For example, to better target subscribers, in February 2011,
we launched Deal Channels, which aggregates daily deals from the same category. We currently offer Deal Channels in home and garden and event tickets and travel. In addition, we recently have launched
Groupon NOW, which is a deal initiated by a merchant on demand and offered instantly to subscribers through mobile devices and our website, and Groupon Goods, which

enables
consumers to purchase vouchers for products directly from our website. As our local e-commerce marketplace grows, we believe consumers will use Groupon not only as a discovery tool
for local merchants, but also as an ongoing connection point to their favorite merchants.

Expand with acquisitions and business development partnerships. Since May 2010, we have made 19 acquisitions. The increase in our
revenue, key
operating metrics and employee headcount from 2009 to 2010 is partially attributable to these acquisitions and the subsequent growth of our International segment as a result of such acquisitions. Our
largest transaction to date was our acquisition of CityDeal, a company based in Europe that operated in 80 markets in 16 countries with 1.9 million subscribers at the time of
acquisition. Excluding CityDeal, each of the companies we have acquired had less than $1 million in annual revenue at the time of acquisition. Typically, the core assets that we gain from an
acquisition are a local management team and small subscriber and merchant bases, to which we then apply our expertise, resources and brand to scale the business. In addition to acquisitions, we have
entered into agreements with local partners to expand our international presence. For example, in February 2011, we entered into a partnership with TCH Burgundy Limited, or Tencent, a Chinese internet
company, to operate a Chinese e-commerce website. We have also entered into affiliate programs with companies such as eBay, Microsoft, Yahoo and Zynga, pursuant to which these partners
display, promote and distribute our deals to their users in exchange for a share of the revenue generated from our deals. We intend to continue to expand our business with acquisitions and business
development partnerships.

Subscriber Economics

We have grown our subscriber base from 0.2 million as of June 30, 2009 to 142.9 million subscribers worldwide as
of September 30, 2011. The chart below shows the number of our subscribers as of the end of each quarter since June 30, 2009 in our North America and International segments:

In
2010 and the nine months ended September 30, 2011, we spent $241.5 million and $466.5 million, respectively, on subscriber acquisition. We acquired
48.8 million and 92.3 million subscribers, respectively, during those periods. Since our inception, we have prioritized growth, and investments in our marketing initiatives have
contributed to our losses. Our investments in subscriber growth are driven by the cost to acquire a subscriber as compared to the profits we expect to generate from that subscriber over time. Once
acquired, subscribers have been relatively inexpensive to maintain because our interaction is largely limited to daily emails and our mobile applications. Over time, as our business continues to scale
and we become

more
established in a greater percentage of our markets, we expect that our marketing expense will decrease as a percentage of gross billings.

To
demonstrate the economics of our business model, we have compared the revenue generated from the North American subscribers we acquired in the second quarter of 2010, which we refer
to as our Q2 2010 cohort, to the online marketing expenses incurred to acquire such subscribers, which is a portion of our total marketing expenses. The revenue attributed to such subscribers reflects
the amount we retained after paying an agreed upon percentage to the featured merchants for the Groupons purchased by such subscribers. The Q2 2010 cohort is illustrative of trends we have seen among
our North American subscriber base. The Q2 2010 cohort included 3.7 million subscribers that we initially spent $18.0 million in online marketing to acquire in the second quarter of
2010. In that quarter, we generated $12.8 million in revenue from the sale of approximately 1.2 million Groupons to these subscribers. Through September 30, 2011, we generated an
aggregate of $92.8 million in revenue from the sale of approximately 9.4 million Groupons to the Q2 2010 cohort. In summary, we spent $18.0 million in online marketing expense to
acquire subscribers in the Q2 2010 cohort and generated $92.8 million in revenue from this group of subscribers over six quarters.

City Case Studies

To further illustrate our business model, we have provided case studies for Chicago, the site of our North American headquarters and
our oldest North American market, Boston, our second oldest North American market, Berlin, the site of our international headquarters, and London, both international markets we entered through the
CityDeal acquisition. As illustrated below, the number of subscribers, cumulative customers, featured merchants and gross billings generally increased in each of these markets over the periods
presented. The number of cumulative repeat customers is not presented as we currently do not track such data on a per city basis. Revenue across each of the North American markets during the periods
presented increased in a manner consistent with the increases in gross billings. Revenue across each of the international markets during the periods presented increased at rates consistent with or
greater than the increases in gross billings. Average revenue per Groupon sold declined or remained stable in each of these markets for the periods presented as a result of the mix of categories
featured. Although average revenue per Groupon sold and the number of Groupons sold declined in certain markets in certain periods, we believe that revenue, rather than average revenue per Groupon
sold or the number of Groupons sold, is a better indicator of our overall growth in each market because it is the measure that we seek to maximize. The performance of these markets is not necessarily
indicative of our future performance in these markets or our current or future performance in other markets.

Chicago is the first market we entered, and we offered our first daily deal there in October 2008. Chicago is also our largest market.
Due to our history in Chicago and the fact that we are headquartered there, we have tested new features and strategies in Chicago. As of June 30, 2009, we had 36,891 subscribers, and,
for the second quarter of 2009, we generated $1.6 million in gross billings from 46,909 Groupons sold. As of September 30, 2011, we had 2.1 million subscribers, and, for
the third quarter of 2011, we generated $28.3 million in gross billings from 1.0 million Groupons sold. The following table shows information regarding subscribers and cumulative
customers as of the end of each quarter and featured merchants, gross billings and Groupons sold in each quarter beginning with the second quarter of 2009:

Three Months Ended,

Chicago

June 30,
2009

Sept. 30,
2009

Dec. 31,
2009

Mar. 31,
2010

June 30,
2010

Sept. 30,
2010

Dec. 31,
2010

Mar. 31,
2011

June 30,
2011

Sept. 30,
2011

Gross billings (in millions)

$

1.6

$

3.0

$

4.0

$

6.5

$

9.9

$

13.9

$

17.7

$

22.7

$

25.7

$

28.3

Subscribers

36,891

62,038

147,882

268,056

492,826

750,118

1,102,146

1,504,978

1,887,348

2,066,886

Cumulative customers

19,003

43,023

74,237

125,403

184,074

285,987

409,746

552,712

699,580

798,070

Featured merchants

67

92

131

144

157

233

470

759

1,228

1,237

Groupons sold

46,909

84,373

149,371

263,304

350,928

541,084

678,933

950,689

1,079,559

959,452

Average gross billings per subscriber

$

43

$

61

$

38

$

31

$

26

$

22

$

19

$

17

$

15

$

14

Average cumulative Groupons sold per customer

2.5

3.1

3.8

4.3

4.9

5.0

5.2

5.5

5.9

6.4

Average gross billings per Groupon sold

$

34

$

36

$

27

$

25

$

28

$

26

$

26

$

24

$

24

$

29

Case Study: Boston

Boston is the second market we entered, and we offered our first daily deal there in April 2009. As of June 30, 2009, we had
17,069 subscribers, and, for the second quarter of 2009, we generated $0.7 million in gross billings from 26,032 Groupons sold. As of September 30, 2011, we had
1.0 million subscribers, and, for the third quarter of 2011, we generated $12.9 million in gross billings from 374,466 Groupons sold. The following table shows information
regarding subscribers and cumulative customers as of the end of each quarter and featured merchants, gross billings and Groupons sold in each quarter beginning with the second quarter of 2009:

Berlin was one of the international markets we entered through our acquisition of CityDeal which was completed in May 2010 and is the
site of our European headquarters. As of June 30, 2010, we had 92,500 subscribers and, for the second quarter of 2010, we generated